The OB/HR Matrix Organisational Behaviour Concept HR Management Function The Link to HR Management Organisational Culture Employee Involvement and Relations Ethics Management Organisational Design Job Design HR Planning Strategic HR Work Re-structuring Employee Involvement and Relations HR acts as an amplifier of the Organisational Culture using various communications means (e.g. Employee Development for the orientation and training of employees). Part of the strategic role of HRM. Designs organisational structures and considers re-structuring needs and job designs. Communication Diversity Power and Politics Ethics Recruitment Selection Diversity Management International HR Employee Relations Union-Management Relations Ethics Management HRM influences the level of employee involvement and transmits the organisational culture. May influence the organisational structure, which has direct repercussions for communication. HR is responsible for Managing Diversity and conforming with legal requirements related to equal opportunity. International HR also handles the preparation of employees for overseas assignments and considers the cultural difference of its employees in the policies that it creates for the organisation in different locations. HR manages employee relations, develops policies to protect employees, formulates disciplinary policies, and provides sanctions. Also may be responsible for developing and implementing Codes of Ethics . Conflict and Negotiation Employee Relations Union-Management Relations Groups and Teamwork Recruitment Selection Work Re-Structuring Personality Self Concept Recruitment Selection Leadership Career Management HR Development Motivation Performance Management Reward Management HR Management are directly involved in conflicts among employees and between employees and management. Negotiations for pay and conditions occur between HRM and organised groups such as Unions or Works Councils. Prospective employees need to be assessed for their ability to work in teams. Any re-structuring that occurs may consider the use of teams replacing individuals working independently. Consideration of individual personality and behaviour to assess the suitability of individuals for particular positions HRM works to develop existing leaders as well as identify and develop future leaders to replace retirees and other departures. Motivational techniques are applied with the use of Performance Management Tools. Reward Management needs to consider which rewards motivate employees. N.B. This list is not exhaustive and you may be able to make other connections between the concepts studied in Organisational Behaviour and the functions performed in HR Management. The OB/HR Matrix is intended as a simple guide to indicate some of the key areas that the two disciplines relate to each other and can influence each other. Journal of Organizational Behavior J. Organiz. Behav. 29, 139-145 (2008) Published online 22 September 2007 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/job.493 The Incubator Enhancing the relevance of organizational behavior by embracing performance management research HERMAN AGUINIS1* AND CHARLES A. PIERCE2 1 The Business School, University of Colorado at Denver and Health Sciences Center, Denver, Colorado, U.S.A. 2 Department of Management, Fogelman College of Business and Economics, University of Memphis, Memphis, Tennessee, U.S.A. Summary There is a science-practice gap in organizational behavior (OB) whereby entire bodies of scholarly knowledge are ignored by practitioners. We identify research needed to improve performance management practices that is likely to enhance the relevance of OB in the eyes of practitioners and thus help reduce the science-practice gap. Copyright # 2007 John Wiley & Sons, Ltd. Introduction Several authors have documented the science-practice gap in organizational behavior (OB) and other management sub-disciplines (Priem & Rosenstein, 2000; Rynes, Bartunek, & Daft, 2001). The general conclusion is that entire bodies of research remain ignored by managers and other organizational decision makers. One reason for the lack of knowledge transfer from the scholarly to the practitioner world is that many managers and other organizational decision makers view academic research as abstract rather than practical, useful, and readily applicable to their jobs and needs (Bailey & Eastman, 1996). In other words, scholarly research is often seen as lacking in relevance. In this paper, we argue that OB scholars should engage in a systematic program of research on the topic of performa nce management. Although traditionally considered a human resource management (HRM) topic, we argue that performance management practices would benet from research emanating from the eld of OB. Because performance management is a prevalent organizational practice, new scholarly knowledge on performance management is likely to be relevant and readily applicable in organizations, which would in turn help bridge the existing science-practice gap. Performance management Performance management is a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the * Correspondence to: Herman Aguinis, The Business School, University of Colorado at Denver and Health Sciences Center, Campus Box 165, P.O. Box 173364, Denver, CO 80217-3364, U.S.A. E-mail: Herman.Aguinis@cudenver.edu Copyright # 2007 John Wiley & Sons, Ltd. Accepted 9 August 2007 140 H. AGUINIS AND C. A. PIERCE organization (Aguinis, 2009, chapter 1). Performance management systems can be based on a consideration of behaviors (i.e., how work is completed), results (i.e., outcomes produced), or both. For example, management by objectives (MBO) can be part of a performance management system that is based on measuring results. There are other types of performance management systems that place an emphasis on processes and not results (e.g., competencies- and skills-based systems). There are many important differences between performance management and performance appraisal, which is the systematic description of an employee's strengths and weaknesses. First, in contrast to performance management, performance appraisal does not usually include strategic business considerations. Second, also in contrast to performance management, performance appraisal systems usually do not include extensive and ongoing feedback that an employee can use to improve his or her performance in the future. Third, performance appraisal is typically a once-a-year event that is often driven by the HRM department, whereas performance management is a year-round way of managing business that is driven by managers. In short, performance appraisal is often seen as an HRM department requirement and does not typically include business and strategic considerations, whereas performance management (because of its emphasis on strategic alignment) can be a tool that helps management improve organizational performance. Because of its emphasis on measurement, performance appraisal has traditionally been the research domain of HRM scholars. However, we argue that performance management, because it is intrinsically related to interpersonal relationships embedded in broader organizational contexts, would benet from research emanating from the eld of OB. Performance management, when implemented well, can lead to important benets for organizations. For example, organizations with formal and systematic performance management systems are 51% more likely to outperform others regarding nancial outcomes and 41% more likely to outperform others regarding additional outcomes including customer satisfaction, employee retention, and other important metrics (Cascio, 2006). A good illustration is Merrill Lynch, which transitioned from a performance appraisal system to a performance management system (Fandray, 2001). First, Merrill Lynch moved away from giving employees one performance appraisal per year to focusing on one of the important principles of performance management: the ongoing conversation regarding performance between managers and employees in which feedback is exchanged and coaching is given if needed. During a mid-year meeting, managers give employees feedback regarding what progress has been made toward the goals and how personal development plans are faring. In addition, an end-of-the-year review incorporates feedback from several sources, evaluates progress toward objectives, and identies areas that need improvement. This feedback also includes information on the relationship between employee performance and its alignment with the strategic goals of his or her unit. To be able to be effective in implementing the system, managers also get extensive training on how to set objectives and conduct reviews. In addition, there is a website that managers can access with information on all aspects of the performance management system. Merrill Lynch's goal for its performance management system is worded as follows: ''This is what is expected of you, this is how we are going to help you in your development, and this is how you will be judged relative to compensation.'' Organizations are aware of the benets that can be produced by a good performance management system and, consequently, performance management has become popular worldwide. For example, a survey of 278 organizations, about two-thirds of which are multinational corporations, from 15 different countries, indicated that about 91% of organizations implement a formal performance management system (Cascio, 2006). A separate survey of almost 1000 HRM professionals in Australia revealed that 96% of Australian companies currently implement some type of performance management system (Nankervis & Compton, 2006). In spite of its popularity, however, performance management systems are not always successful and do not always lead to the intended results. For Copyright # 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 29, 139-145 (2008) DOI: 10.1002/job ORGANIZATIONAL BEHAVIOR AND PERFORMANCE MANAGEMENT 141 example, a survey of employees in Australia found that fewer than 20% of employees reported that their performance reviews helped them improve their performance. Overall, the majority of respondents reported being dissatised with the level of feedback and frequency of performance reviews from managers (Moullakis, 2005). Another reason why performance management has become so popular is that it provides useful information needed for decision making in other HRM and development activities. For example, consider the relationship between performance management and training. Performance management provides information on developmental needs for employees. In the absence of a good performance management system, it is not clear that organizations will use their training resources efciently (i.e., to train those who most need it in the most critical areas). Similarly, performance management systems are the source of information used in making decisions about rewards and the allocation of resources (i.e., by linking performance to rewards), succession planning (i.e., performance in the past is used as a predictor of performance in the future), and stafng strategies (i.e., performance management systems allow organizations to create talent inventories and identify talent gaps that are targeted with subsequent recruiting efforts). Performance management process As described in detail by Aguinis (2009), performance management is an ongoing process that involves the following stages: prerequisites, performance planning, performance execution, performance assessment, performance review, and performance renewal and re-contracting. These stages take place in a cyclical and ongoing manner. The rst stage, prerequisites, refers to having knowledge of the organization's mission and strategic goals and knowledge of the job in question. Performance planning involves a discussion and agreement between the supervisor and the employee regarding what needs to be done and how it should be done (i.e., a consideration of both results and behaviors), as well as a developmental plan. During the third, performance execution, stage the employee strives to produce results and display behaviors agreed upon earlier as well as to work on developmental needs. Performance assessment involves both the employee and the supervisor and the evaluation of the extent to which the desired behaviors have been displayed, and whether the desired results have been achieved. Although many sources can be used to collect performance information (e.g., peers, subordinates), in most cases the direct supervisor provides the information. This also includes an evaluation of the extent to which the goals stated in the development plan have been achieved. The performance review stage involves the meeting between the employee and the supervisor to review their assessments. This meeting is usually called the appraisal meeting or discussion. The appraisal meeting is important because it provides a formal setting in which the employee receives feedback on his or her performance. The nal stage in the performance process is renewal and re-contracting. Essentially, this is identical to the performance planning component. The main difference is that the renewal and re-contracting stage uses the insights and information gained from the other phases. For example, some of the goals may have been set unrealistically high, given an unexpected economic downturn. This would lead to setting less ambitious goals for the upcoming review period. OB research needed to maximize the effectiveness of performance management There are several topical areas and theories in the eld of OB that have the potential to produce knowledge that would be directly applicable and relevant to how performance management systems are designed and implemented. Due to space constraints, we can only mention a few. Consider the Copyright # 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 29, 139-145 (2008) DOI: 10.1002/job 142 H. AGUINIS AND C. A. PIERCE following admittedly selected issues, which we discuss taking into account the performance management process just described: Social power, inuence, and leadership. A supervisor's social power refers to his or her ability, as perceived by others, to inuence behaviors and outcomes (Farmer & Aguinis, 2005). If an employee believes that his or her supervisor has the ability to inuence important tangible and intangible outcomes (e.g., nancial rewards, recognition), then the performance management system is likely to be more meaningful. Thus, a fruitful area of future research could involve understanding conditions under which supervisors are likely to be perceived as more powerful and the impact of these power perceptions on the meaningfulness and effectiveness of performance management systems (cf. Fiol, O'Connor, & Aguinis, 2001). For example, will employees take feedback more seriously if it comes from a supervisor perceived to be powerful as compared to another supervisor who may be seen as less powerful? Related to power and inuence is the topic of leadership because leaders need power (i.e., ability to inuence) to be effective. Some leaders, including former General Electric CEO Jack Welch, are legendary for their endorsement of particular types of performance management systems (Aguinis, 2009, chapter 9). Welch was also personally involved in the design and implementation of GE's now famous ''vitality curve'' (i.e., forced distribution) system. A less well-known aspect of Welch's involvement is that he was a true champion of GE's performance management system and led by example. For example, Welch had heard customer complaints about a specic product so he charged the manager of the division with improving the productivity of that product fourfold. The manager sent Welch detailed weekly reports over the course of the next 4 years. Welch would send the reports back every 3 or 4 weeks with comments congratulating successes or pointing out areas in which the manager needed to improve. The manager stated that the fact that the CEO took the time to read his reports each week and send back comments motivated him to reach the lofty goal that Welch had set for him (Byrne, 1998). Thus, future research regarding the relationship between how leaders think and behave regarding performance management and subsequent impact on the effectiveness of performance management systems is certainly warranted. For example, what type(s) of leadership behaviors are likely to enhance the benets of a performance management system? Trust. The ''collective trust'' of all stakeholders in the performance management process is crucial for the system to be effective (Farr & Jacobs, 2006). Given the current business reality of downsizing and re-structuring efforts, how can trust be created so that organizations can implement successful performance management systems? In other words, future research could attempt to understand conditions under which dyadic, group, and organizational factors are likely to enhance trust and, consequently, enhance the effectiveness of performance management systems. For example, how long do employees take to psychologically recover from a downsizing event? What are the factors that affect this length of time? What type of performance management system is best in this situation (e.g., developmental vs. administrative vs. both combined)? Social exchange. The relationship between individuals (and groups) and organizations can be conceptualized within a social exchange framework. Specically, individuals and groups display behaviors and produce results that are valued by the organization, which in turn provides tangible and intangible outcomes in exchange for those behaviors and results. Research using a social exchange framework could inform the design of performance management systems by providing a better understanding of the perceived fairness of various types of exchange relationships and the conditions under which the same types of relationships are likely to be perceived as being more or less fair. For example, what are the factors that affect the responses to the ''what is in it for me'' question for both supervisors and employees? If supervisors believe that they will accrue more benets from producing upwardly biased ratings than accurate ratings (e.g., ''I won't have to Copyright # 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 29, 139-145 (2008) DOI: 10.1002/job ORGANIZATIONAL BEHAVIOR AND PERFORMANCE MANAGEMENT 143 face unhappy subordinates when I give them negative feedback''), then the system will not be successful. Group dynamics and close interpersonal relationships. It is virtually impossible to think of an organization that does not organize its functions at least in part based on teams. Consequently, many organizations include a team component in their performance management system (Aguinis, 2009, chapter 11). Such systems usually target individual performance and also an individual's contri bution to the performance of his or her team(s) and the performance of teams as a whole. Within the context of such performance management systems, how do group dynamics affect who measures performance and how performance is measured? How are team-level goals established? What mechanisms and processes could be implemented so that team-level performance is assessed accurately and fairly? These are just some of the many questions that could be investigated within the broad issue of the relationship between group dynamics and team-level performance manage ment systems. Also related to group dynamics is the issue of close personal relationships such as supervisor-subordinate workplace romances (Pierce, Aguinis, & Adams, 2000; Pierce, Broberg, McClure, & Aguinis, 2004), which involve conicts of interest that may affect the successful implementation of performance management systems. There is a need to generate research-based knowledge to guide performance management practices when the parties involved have a close interpersonal relationship and thus a potential conict of interest exists. For example, what are the types of performance management systems that will monitor a workplace romance in a way that will not interfere with the employees' privacy and personal relationship yet will be able to detect performance-related problems that need to be addressed? Negotiation and communication. Performance management systems include ongoing negotiations regarding the establishment of performance standards, which are the yardsticks to be used to assess success, the distribution of tangible and intangible rewards, and so forth. Similarly, issues about communication permeate all stages of performance management. Communication plays an import ant role not only at the dyadic and team level but also at the organizational level (i.e., communication plans including the description of the system's goals and the processes involved in implementing the system). What types of communication practices are likely to lead to more effective systems? What types of communication practices are likely to minimize perceptual biases involving selective attention and selective perception? Research-based answers to these and other similar questions will be helpful in deciding how and what to communicate (and to whom) during the various stages of implementing a performance management system. Mentorship. As noted above, coaching and feedback are important aspects of performance manage ment systems. Although most mentorship activities take place at the informal level, many organizations have formal systems. Mentorship relationships involve development and coaching, which are activities that may be incompatible with some of the administrative roles of performance management. How can formal and informal mentorship systems be integrated successfully within performance management? Research-based knowledge regarding the successful integration of mentorship and performance management is likely to improve the effectiveness of performance management systems. In closing, we think it is time for the eld of OB to embrace performance management research. Considering the central role that performance management plays in organizations worldwide, creating rigorous and actionable knowledge that informs performance management practices is likely to enhance the perceived relevance of the eld. To be sure, and due to space limitations, in this paper we discussed an admittedly selected set of research topics and questions. However, this type of relevant research is likely to help reduce the widely documented science-practice gap in OB and the broader eld of management. Copyright # 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 29, 139-145 (2008) DOI: 10.1002/job 144 H. AGUINIS AND C. A. PIERCE Acknowledgements This research was conducted while Herman Aguinis was on sabbatical leave from the University of Colorado at Denver and Health Sciences Center and holding visiting appointments at the University of Salamanca (Spain) and University of Puerto Rico. Author biographies Herman Aguinis is the Mehalchin Term Professor of Management in the Business School, University of Colorado at Denver & Health Sciences Center. He has published four books and more than 50 articles in AMJ, AMR, JAP, PPsych, OBHDP, and elsewhere. He conducts research on stafng, social power and inuence, and organizational research methods. Charles A. Pierce is an Associate Professor and a Suzanne D. Palmer Research Professor in the Department of Management, Fogelman College of Business and Economics, University of Memphis. He has published more than 25 articles in journals such as AMJ, JAP, OBHDP, JOM, and JOB. His research interests include workplace romance, sexual harassment, and organizational research methods. References Aguinis, H. (2009). Performance management (2nd ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Bailey, J. R., & Eastman, W. N. (1996). Tensions between science and service in organizational scholarship. Journal of Applied Behavioral Science, 32, 350-355. Byrne, J. A. (1998, June 8). How Jack Welch runs GE: A close-up look at how America's #1 manager runs GE. Business Week. Available online at http://www.businessweek.com/1998/23/b3581001.htm. Retrieval date: June 30, 2007. Cascio, W. F. (2006). Global performance management systems. In I. Bjorkman, & G. Stahl (Eds.), Handbook of research in international human resources management (pp. 176-196). London, UK: Edward Elgar Ltd. Fandray, D. (2001, May). Managing performance the Merrill Lynch way. Workforce online http://www.work force.com/archive/feature/22/28/68/223512.php. Retrieval date: March 6, 2007. Farmer, S., & Aguinis, H. (2005). Accounting for subordinate perceptions of supervisor power: An identitydependence model. Journal of Applied Psychology, 90, 1069-1083. Farr, J. L., & Jacobs, R. (2006). Trust us: New perspectives on performance appraisal. In W. Bennett, C. E. Lance, & D. J. Woehr (Eds.), Performance measurement: Current perspectives and future challenges (pp. 321-337). Mahwah, NJ: Lawrence Erlbaum. Fiol, C. M., O'Connor, E. J., & Aguinis, H. (2001). All for one and one for all? The development and transfer of power across organizational levels. Academy of Management Review, 26, 224-242. Moullakis, J. (2005, March 30). One in ve workers ''actively disengaged''. The Australian Financial Review, 10. Nankervis, A. R., & Compton, R. (2006). Performance management: Theory in practice? Asia Pacic Journal of Human Resources, 44, 83-101. Pierce, C. A., Aguinis, H., & Adams, S. K. R. (2000). Effects of a dissolved workplace romance and rater characteristics on responses to a sexual harassment accusation. Academy of Management Journal, 43, 869- 880. Copyright # 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 29, 139-145 (2008) DOI: 10.1002/job ORGANIZATIONAL BEHAVIOR AND PERFORMANCE MANAGEMENT 145 Pierce, C. A., Broberg, B. J., McClure, J. R., & Aguinis, H. (2004). Responding to sexual harassment complaints: Effects of a dissolved workplace romance on decision-making standards. Organizational Behavior and Human Decision Processes, 95, 66-82. Priem, R. L., & Rosenstein, J. (2000). Is organization theory obvious to practitioners? A test of one established theory. Organization Science, 11, 509-524. Rynes, S. L., Bartunek, J. M., & Daft, R. L. (2001). Across the great divide: Knowledge creation and transfer between practitioners and academics. Academy of Management Journal, 44, 340-355. Copyright # 2007 John Wiley & Sons, Ltd. J. Organiz. Behav. 29, 139-145 (2008) DOI: 10.1002/job Learning goals or performance goals: Is it the journey or the destination? While setting goals is important, setting an outcome goal - rather than a learning goal -- can have a negative impact on an individual's performance. This is especially true when acquiring skills and knowledge is more important than being persistent and working harder. Instead of focusing on the end result, a learning goal focuses attention on the discovery of effective strategies to attain and sustain desired results. These authors build a compelling case for learning goals' superiority and describe the positive impact they can have on leadership, performance appraisal, and professional development. By Gerard H. Seijts and Gary P. Latham Gerard H. Seijts is Associate Professor of Organizational Behaviour at the Richard Ivey School of Business. Gary P Latham is Secretary of State Professor of . Organizational Effectiveness at the Rotman School of Management, University of Toronto. can happen when people feel undue pressure to make the numbers. Richard McGinn, the former CEO of Lucent, prided himself for imposing "audacious" goals on his managers, believing that such a push would produce dream results. In 2000, McGinn pushed his managers to produce results they could not deliver-not, apparently, without crossing the line. The pressures that McGinn applied were described in a complaint that a for mer Lucent employee filed, charging that McGinn and the company had set unreachable goals that caused them to mislead the public. Empirical research supports this claim, namely that setting unrealistic performance-outcome goals sometimes causes people to engage in unacceptable or illegal behaviour. These findings point to a fault with the type of goal that was set, namely the perfor mance-outcome goal. Setting a learning goal, on the other hand, is likely to be far more effective in helping individuals discover radical, out-of-the-box ideas or action plans that will enable organizations to regain and sustain a competitive edge. This paper discusses both types of goals and explains why learning goals can be more effective and when it is more appropriate to use them. The good and the bad of setting goals Goal mechanisms Nearly all executives understand the importance of goal setting. And yet, most organizations have no idea how to manage specific, challenging goals, or what are sometimes labelled "stretch goals." For example, some organizations may ask employees to double sales or reduce productdevelopment time but fail to provide those employees with the knowledge they need to meet these goals. It is foolish and even immoral for organizations to assign employees stretch goals without equipping them with the resources to succeed - and still punish them when they fail to reach those goals. This lack of guidance often leads to stress, burnout, and in some instances, unethical behaviour. Generally speaking, there are at least four benefits of setting goals. 1. Specific performance goals affect an employee's choice about what to focus on, or which actions are goal relevant and which are not. 2. Goals help employees adjust their effort and persistence according to the goal's level of difficulty. 3. Goals help employees persist until they have reached them. The Lucent scandal is a compelling example of what - 1 - Ivey Business Journal May/June 2006 However, these three motivational mechanisms alone are not always sufficient for attaining a goal. 4. A fourth benefit of goal setting has to do more with cognition than motivation. Specifically, it has to do with the fact that a certain type of goal, the learning goal, helps employees acquire the knowledge to understand and apply what they are doing. For complex tasks, setting goals based on one's knowledge stimulates the development of task strategies to complete those tasks. For example, the Weyerhaeuser Company discovered that unionized truck drivers who had been assigned a specific high-performance goal in terms of the number of trips per day from the log ging site to the mill started to work "smarter rather than harder." After being assigned goals, truck drivers developed tactics to attain them. These included the use of radios to coordinate their efforts so that a truck would always be at the site when logs were available for loading. Perfor mance increased because drivers drew on their existing knowledge to attain their goal. While they already knew how to use a radio, they chose to apply this knowledge in such a way that productivity increased. because "he had literally burned a hole in the raging fire." However, Dodge's crew ignored his order to jump inside the expanding ring of fire and all of them died while trying to outrun the blaze. For Dodge, working smart, that is, knowledge acquisition, led to a far better result than "working hard." In the context of running a successful business, Dell Computer Corporation CEO Michael Dell emphasizes the importance of information and knowledge acquisition: "It's all about knowledge and execution. Traditionally, it was thought that lack of capital was the barrier to entry into a new competitive market. Take a look around, and you'll see that's just not true anymore. Information will increasingly become both a tool to help businesses hone their competitive edge and a weapon to protect them against the competition. Besides Dell, there are countless successful companies that are thriving now despite the fact that they started with little more than passion and a good idea. There are also many that failed, for the very same reason. The difference is that the thriving companies gathered the knowledge that gave them a substantial edge over their competition, which they then used to improve their execution, whatever their product or service. Those that didn't simply didn't make it." Motivation or knowledge acquisition? Goal setting is viewed by most executives and behavioral scientists as a motivational technique. The fact is, however, that most of the tasks that scientists have studied have been straightforward, so that the effect of a goal on an employee's choice, effort, and persistence could be easily assessed. But what happens when the task is not straightforward? Anecdotal evidence and empirical research provide a thought-provoking answer. The ordeal of Wagner Dodge and the 15 firefighters under his command illustrates the difference between working hard (motivation) and working smart (knowledge acquisition). The ordeal is described by leadership expert Michael Useem in The Leadership Moment. A hellish, fast-moving forest-and-grass fire caused the group to run for their lives. With less than a minute remaining until the fire would swallow the group, Dodge discovered a way for the group to survive. He started an "escape fire" that cleared a small area of flammable prairie grass and bushes. As Useem states, Dodge sur vived In sum, a person's quest to be effective is influenced by ability and motivation, so that in the end, performance is a function of creative imagination or learning, AND sheer effort and persistence. This is particularly true for tasks where an individual lacks the requisite knowledge or skill to master those tasks. T hus, we see that setting a performance goal can have a downside. Performance-outcome goals and their downside Acquiring knowledge before setting a perfor manceoutcome goal can be critically important. On the other hand, setting a specific performance goal can damage a person's effectiveness in the early stages of learning. This is because in the early stage of learning a person's attention needs to be focused on discovering and mastering the processes required to perfor m well, r ather than on reaching a certain level of performance. - 2 - Ivey Business Journal May/June 2006 Game (CIBG). The CIBG is an interactive, computerbased simulation that is based on the events that occurred in the U.S. cellular telephone industry. It uses a complex set of formulas to link the various strategic choices to performance outcomes. The CIBG consists of 13 rounds of decision making, each corresponding to one year of activity. Participants were asked to make decisions concerning ten areas of activity during each round. Examples of the strategic options are pricing, advertising, sales-force, cost containment, finance, geographic scope, and alliances with other companies. Each area of activity allowed numerous choices. For example, in the finance area, participants could raise funds by issuing bonds, public shares or dividends, or by borrowing from the bank. This reality highlights the fact that the attentional demands that can be imposed on people are limited. Tr ying to attain a specific perfor mance g oal places additional demands on people, so much so that they are unable to devote the necessary cognitive resources to mastering the task. A performance-outcome goal often distracts attention from the discovery of task-relevant strategies. For example, focusing on a score of 95 may prevent a novice golfer from focusing on mastering the swing and weight transfer, and using the proper clubs to shoot 95. Unwittingly, the golfer has diverted the cognitive resources necessary for understanding the task to a selfregulatory activity, namely shooting 95. The golfer has focused on scoring at the expense of acquiring the skills to become a better golfer. In the process, the golfer has exposed the downside of setting a performance goal. The evolution of the cellular telephone industry was predetermined in the simulation. For example, during the first eight decision periods (simulating the industry's first eight years) competition was restricted by region. Following year eight, however, the telecommunications industry experienced a radical environmental change in the for m of deregulation. Hence, participants in the simulation were given several warnings that deregulation was likely to occur. The strategic options that were viable before deregulation were no longer effective. Thus, to maintain or increase market share, participants now needed to discover a new set of strategies. This aspect of the CIBG simulation reflects a business environment where past success strategies are by no means a guarantee for future success. Learning goals or performance-outcome goals That setting specific performance goals can sometimes actually worsen performance is at first glance astonishing in that this conclusion is at odds with the accumulated findings of over a quarter of a century of research in the behavioral sciences. For at least three decades, this research has shown that goal setting is a powerful and effective motivational technique. Specifically, the research shows again and again that a performance goal influences choice, effort, and the persistence needed to attain it. However, it is often forgotten that performance at a high level is a function of ability as well as motivation. Consequently, we wondered what would happen if the goal of certain tasks, say those for which minimal prior learning or performance routines existed, was switched to knowledge acquisition instead of motivation. (In situations where learning rather than an increase in motivation is required, setting a specific performance goal is not likely to be prudent. Perhaps a specific high-learning goal should be set instead. For example, a novice golfer should consider setting a high learning goal such as learning how to hold a club or when to use a specific iron. In short, the novice golfer must learn how to play the game before becoming concerned with attaining a challenging performance outcome (e.g. a score of 95).) The participants assigned a specific high-learning goal were told to identify and implement six or more strategies for increasing market share. The results revealed that: 1. Performance was highest for individuals who had a specific high learning goal. Their market share was almost twice as high as those with a performance outcome goal. There was no significant difference in performance among individuals with a performance goal, or those who were simply urged to do their best. 2. Individuals who had a learning goal took the time necessary to acquire the knowledge to perform the task effectively and to analyze the task-relevant information that was available to them. To test our idea, we examined the effects of learning versus performance-outcome goals by using a complex business simulation, namely, the Cellular Industry Business 3. Those with a learning goal were convinced that they -3- Ivey Business Journal May/June 2006 for a task that is relatively straightforward wastes time. It is also ineffective in that the person has already mastered the requisite performance routines and is aware of the requisite job behaviors. were capable of mastering the task. This suggests that the increase in self-efficacy resulting from a learning goal occurs as a result of the discovery of appropriate strategies for task mastery. A performance goal, on the other hand, can lead to a highly unsystematic "mad scramble" for solutions. These research findings are consistent with the observations of the CEOs cited throughout the paper. In short, learning goals help people progress to the point where perfor mance-outcome g oals increase one's effectiveness. The focus of a learning goal is to increase one's knowledge (ability); the focus of a perfor mance goal is to increase one's motivation to implement that knowledge. Therefore, both learning and performance goals are needed to be successful. But, as noted earlier, our research shows that a performance goal should not be set until an employee has the knowledge to attain it. Why learning goals? Practical applications of learning goals How does a learning goal differ from a performanceoutcome goal? What explains the superiority of a learning goal over a performance goal for a complex task? How can specific challenging learning goals be applied in business settings? Based on our findings, as well as the experiences of the CEOs we have cited, there are at least 3 areas where the application of learning goals should prove particularly helpful in impr o v ing perf o r mance -- leader ship, performance management and professional development. Learning goals, performance goals and the efficacy of the former 1. Leadership 4. Those with a learning goal had a higher commitment to their goal than did those with a performance goal. The correlation between goal commitment and performance was also significant. Jack Welch once stated that, "An organization's ability to learn and translate that learning into action is the ultimate competitive advantage . . . I wish we'd understood all along how much leverage you can get from the flow of ideas among all business units. . . the enormous advantage we have today is that we can run GE as a laboratory for ideas." The primar y distinction between perfor mance and learning goals lies in the framing of the instructions given to employees. Hence, the difference between these two types of goals is first and foremost a "mindset." The respective instructions focus attention on two different domains-motivation versus ability. A performance goal, as the name implies, frames the instructions so that an employee's focus is on task performance (e.g. attain 20 percent market share by the end of the next fiscal year). The search for information to attain the goal is neither mentioned nor implied because knowledge and skills are considered a given for tasks that require primarily choice, effort, or persistence. Similarly, a learning goal frames the instructions in terms of knowledge or skill acquisition (e.g. discover three effective strategies to increase market share). A learning goal draws attention away from the end result to the discovery of effective task processes. Once an employee has the knowledge and skills necessary to perform the task, a specific performance goal should be set to direct attention to the exertion of effort and persistence required to achieve it. The performance goal cues individuals to use strategies or performance routines that the person knows are effective. Setting a learning goal Three examples suggest the benefits of having a leader focus employee attention on the attainment of learning goals. First, when Andy Grove was the CEO at Intel Corporation, he was obsessed with learning as much as possible about the changing environment. In Grove's own words, "I attribute Intel's ability to sustain success to being constantly on the alert for threats, either technological or competitive in nature." Second, Sam Walton continued to refine his business strategies and discover ways for improving his stores. He never stopped learning from competitors, customers, and his own employees. He believed that there was at least one good idea he could learn, even from his worst competitor. Walton passed on this philosophy to his employees. As Kurt Bernard, a retailing consultant, noted: -4- Ivey Business Journal May/June 2006 "When he meets you . . . he proceeds to extract every piece of information in your possession. He always makes little notes. And he pushes on and on. After two and a half hours, he left, and I was totally drained. I wasn't sure what I had just met, but I was sure we would hear more from him." Leaders such as Welch, Grove and Walton would increase the effectiveness of their workforce if they set specific high learning goals for sharing ideas among divisions, identifying potential threats in the environment, or extracting ideas from competitors, customers and employees. Third, the primary use of learning goals at Goldman Sachs, as described by Steve Kerr, is to develop present and future leaders. For example, a sales manager might be asked to join or even lead a taskforce whose goal is to discover a new process for product development. People's leadership skills are developed by assigning specific learning goals that require these people to go outside their comfort zone. 2. Performance management Coca Cola Foods and PricewaterhouseCoopers (PWC) are among the many companies that have incorporated goal setting into their coaching and mentoring practices. T he g oals ar e typicall y perf or mance outcomes or behavioral goals that are within employees' repertory of knowledge and abilities to increase in frequency (e.g. communicate the objectives of the program to coworkers). PWC, which recognizes that this approach is not effective for every employee, also sets learning goals. For example, like other organizations, they hire job applicants for their aptitude rather than their existing skills. New employees, therefore, benefit from mentors who actively help them discover ways to develop their competencies within the fir m, and who assign them specific, high lear ning, rather than perfor mance, goals. Employees assigned challenging learning goals in the early stages of their job typically outperform those who are initially given specific high performance targets. Learning goals are also appropriate for seasoned managers. For example, those who operate in global organizations find it fruitful to focus on ways to effectively manage a myriad of social identity groups so as to minimize rigidity, insensitivity, and intolerance.. Newly formed work teams, especially culturally diverse teams, need time to gel. Ilya Adler observed that managers view, "the cultural issue as an additional burden to the already difficult task of making a team function effectively." Focusing on the end result before team dynamics have been ironed out can hurt the team's performance. Thus, a team leader may be well advised to focus on the discovery of 3-5 strategies, processes, or procedures for accelerating effective interaction and teamwork, particularly ways of fostering understanding of local customs and values and developing mutual understanding and trust. In contrast, assigning a culturally diverse work team a specific performance goal before the team's rules of conduct have become accepted is likely to lead to prolonged "storming" and "nor ming." Indeed, it is not uncommon to see culturally diverse teams spend more time working out their differences than doing the actual work. 3. Professional development Jack Welch often moved his top executives from one functional area to another. Similar to the mentoring practice at PWC, he did this to broaden their knowledge base. When this is done in any organization today, employees should be asked to come up with a specific number of ideas that would help them improve the performance of their respective businesses. Welch also introduced the WorkOut, a forum that was intended to enable management and employees to share knowledge. Facilitators of these types of sessions should be asked to set a goal of discovering a specific number of ideas or strategies that will improve organizational effectiveness. Other executives also ensure the on-going professional development of their senior executives through job rotation. The purpose of the rotation is to "shake the executives up," provide them with opportunities to learn new perspectives, get them out of their comfort zones, and develop greater creativity. To ensure that this occurs, specific learning goals should be set to ensure that the broad perspective to which the executives are exposed actually helps the company make decisions in a cohesive fashion. In the end, goals can be different Today's workforce is under intense pressure to produce -5- Ivey Business Journal May/June 2006 tangible results. Workers are perpetually in a "performance mode." This is a plus when known performance routines continue to be effective, and when the issue is fostering the conditions for a highly motivated workforce. In such instances, countless studies in the behavioral sciences support the significant motivational benefits of setting specific, challenging performance goals. However, a high-performing workforce is a function of both high ability and motivation. This is particularly true in today's business environment in which organizations face rapidly changing technologies, information overload, escalating competitive pressures, and a host of other challenges. Hence the importance of knowing that learning goals and performance goals are different. They differ in the behavior/actions required to attain them and in their appropriateness for increasing an organization's effectiveness. The purpose of a learning goal is to stimulate one's imagination, to engage in discovery, and to "think outside the box." The purpose of a performance goal is to choose to exert effort and to persist in the attainment of a desired objective or outcome using the knowledge one already possesses. Thus, the behavior of a person with a learning goal is to systematically search for new ideas, actively seek feedback, be reflective, and execute a specific number of ideas in order to test newly for med hypotheses. The behavior of a person with a performance goal is to focus on known ways to use the knowledge and skills that have alr ead y been master ed. W hen the strateg y f or an organization is already known and the ways to implement it have been deciphered, setting performance goals for an individual or team is appropriate. When an effective strategy requires innovation that has yet to emerge, specific high learning goals should be set. Acknowledgement The authors acknowledge the suggestions of Paul Beamish and Ed Locke in preparing this paper. -6- Ivey Business Journal May/June 2006 Available online at www.sciencedirect.com Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 7th International Strategic Management Conference The Relationship between Reward Management System and Employee Performance with the Mediating Role of Motivation: A Quantitative Study on Global Banks Pnar Gngr Okan University, Istanbul, 34722 Turkey Abstract The primary goal of this study is to research the relationship between the reward management system applications and employee performance of bank employees on global banks in Istanbul. It also focuses on the role of motivation as an intervening factor. According to the literature review on the previous studies it is proven that organizations use reward systems and strategies to motivate their employees and to increase their performance. This study will have lots of contributions to the business world. Organizations may improve or change their reward systems to survive in today's environment with the help of this study. They may renew their reward systems and put more efficient and effective ones. In this study, employee performance effectiveness is determined on reward systems. At the beginning of the study, there is a literature review and there are hypotheses concerning the effects of reward management system and motivation on employee performance. Secondly, theoretical framework is discussed through the effects of reward management system applications and motivation on employee performance. Finally hypotheses are tested using data from 116 bank employees in 12 global banks and research results or findings are analyzed. Keywords: Reward Management System, Employee Performance, Motivation, Global Bank 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license. 2011 Published by Elsevier Ltd. Selection and/or peer-review under responsibility 7th International Selection and/or peer-review under responsibility of 7th International Strategic Management Conference Strategic Management Conference Corresponding author. Tel. + 90-216-677-1630 fax. +90-216-677-1647 Email address: pinar.akinci@okan.edu.tr 1. Introduction Globalization is a concept that encompasses change and competition. Organizations who want to survive in an intense competition and to develop themselves are required to produce different kinds of solutions. There are lots of external factors that triggered organizations to work harder. Especially in 1877-0428 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license. Selection and/or peer-review under responsibility of 7th International Strategic Management Conference doi:10.1016/j.sbspro.2011.09.029 Pnar Gngr / Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 global crises, businesses in terms of profitability and permanency should pay attention to change and development within their systems. Undoubtedly, the most important factor is human in organizations. One of the main management strategies of the organizations is to invest in employees. Organizations are seeking to develop, motivate and increase the performance of their employees in a variety of human resources applications. Therefore, the reward management system has been the most considerable practices of the human resource management system. Reward management system is a core function of human resource discipline and is a strategic partner with company managements. Besides, it has an important role on employee performance. [15] Barber and Bretz (2000) mentioned that reward management systems have major impact on organizations capability to catch, retain and motivate high potential employees and as a result getting the high levels of performance. [7] On the other hand, it is crucial to invest in employee development for enhancing the skills and abilities of employees and organization. Furthermore, social exchange theory shows that employees behave in positive ways when the organizations invest to them. [4] Organizational inducements are the factors for the motivation of the employees and pro socially motivated employees make a great effort to benefit the organization. [11] According to Steers and Porter (1987), work motivation is a factor that sustain and manage employee behavior. In another study, Porter and Miles (1974), put some theories about motivation and they gathered into three categories which are job (e.g., degree of autonomy), individual (e.g., need for achievement) and work environment characteristics (e.g., rewards). [1] Yang (2008) has investigated the individual performance and results of his study showed that we cannot verify individual performance. Even so, he also claimed that if employees' performance is observable than organizations can use direct bonuses or relational contracts to motivate them based on their performance. Bishop (1987), on the other hand has studied about employee performance and found that recognition and reward of employee performance leads to differentiation between the productivity of the employees. 2. Literature Review And Hypotheses 2.1. Reward Management System Reward management system contains the organization's policies, processes and practices for rewarding its employees in accordance with their contribution, abilities and artifice. It is progressed within the organization's reward philosophy, strategies and policies, and includes agreements in the form of processes, practices, structures and procedures which will provide appropriate types and levels of pay, benefits and other forms of reward. [2] Employee performance is originally what an employee does or does not do. Performance of employees could include: quantity of output, quality of output, timeliness of output, presence at work, cooperativeness 2.1.1. Reward Management System Applications 1511 1512 Pnar Gngr / Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 Reward Management System Tool includes both Financial and Non-Financial Rewards which are also called as Extrinsic and Intrinsic Rewards. Financial rewards are salary increase, bonus system, perquisite etc. On the other hand there are non-financial rewards which are; promotion and title, authority and responsibility, education, appreciation and praise, certificate and plague, participation to decisions, vacation time, comfort of working place, social activities, feedback, flexible working hours, design of work, recognition, social rights etc. [15] 2.2. Employee Task Performance According to Yazc, (2008), the effectiveness of an organization's performance and reward management have an impact on moral and productivity. Many organizations have found that far from complementing the stated aims of the business, their performance and reward systems were actually driving counter-productive behavior. On the other hand ''path-goal model'' is absolutely explain the relationship between reward system and employee performance. The concept states that ''if a worker sees high productivity as a path leading to the attainment of one or more of his personal goals, he will tend to be a high producer. Conversely, if he sees low productivity as a path to the achievement of his goals, he will tend to be low producer. In other words, the employee would be motivated to expend a greater amount of effort in his work if he felt his previous effort had resulted in his receiving rewards''. [8] Hypothesis 1: Reward management system applications are significantly and positively related to employee performance. 2.3. Motivation A basic explanation of motivation is the capability to change behavior. Motivation is a drive that holds one to act because human behavior is directed toward some goal. [5] Grant (2008) established a study where motivation enforced the employee outcomes such as persistence, productivity and performance. Besides, motivated employees are found to be more selfdriven and more autonomy-oriented than those who are less motivated (e.g. Ryan and Deci, 2000; Thomas, 2002, as cited in Grant, 2008), which suggests that they will take more responsibility when offered developmental opportunities. Motivated employees are also more engaged and involved with their jobs (e.g. Guay et al., 2000; Vansteenkiste et al., 2007), they may be more involved in the work of their colleagues, when compared with employees with low motivation. [11] Hypothesis 2: Motivation is significantly and positively related to employee performance. Social cognitive theory, claims that rewards given for success of challenging performance standards may result in high motivation. [5] Hypothesis3: Reward management system applications are positively related to motivation. 3. Methodology 3.1. Sample and Procedure 1513 Pnar Gngr / Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 The sample of this study includes bank employees in 12 global banks in Istanbul who are titled as administrative staff, assistant supervisor, supervisor, director, deputy manager and manager. Data were collected through survey method. The sampling frame consists of employees in the center of global banks. The concepts in the study are developed by using measurement scales adopted from further studies. Data for this research are collected by online system. The questionnaire was sent to the e-mails of the bank employees. The questionnaire consists of two sections. First part includes seven socio demographic questions including; gender, age, marital status, education level, work period, position in the organization (title) and name of the bank. At the second part, there are 49 statements which determine the choices of employees about reward system tools, motivation and employee performance. These statements will be graded using a 5-point Likert scale. These points in the scale are \"Strongly Disagree\" (5), \"Disagree\" (4), \"Uncertain\" (3), \"Agree\" (2), \"Strongly Agree\" (1). The first questionnaire includes 16 statements used in this study was adapted from the researchers of Nas, 2006 The second questionnaire used for this study which includes 33 statements was adapted from the researches of Kaplan, Elbir and Ta pnar, 2006. Approximately 500 bank employees are randomly selected and a total of 116 employees were returned. Therefore, the respond rate is % 23,2 for this study which is below the expected respond rate of %50. Table 1. Demographic Characteristics of Respondents Variable N % Variable AGE N % EDUCATION LEVEL 20-30 59 50,9 High School 31-40 47 40,5 Academy 41-50 8 6,9 Undergraduate 77 66,4 51-60 2 1,7 Graduate 21 18,1 Doctorate 4 3,4 0,9 1-5 63 54,3 JOB TITLE 2 1,7 12 10,3 WORK PERIOD Administrative Staff 1 Assistant Supervisor 29 25 5-10 33 28,4 Supervisor 37 31,9 10-15 17 14,7 Director 35 30,2 20 and more 2 1,7 Deputy Manager 6 5,2 Manager 8 6,9 The reason for asking socio demographic questions is to analyze the average response rate of employees according to their age, education level etc. Besides, the title, education level and work period of the respondents are necessary for the validity of the answers. Table 1 shows the demographic characteristics of 116 respondents. In terms of age, 50,9 percent were between the age of 20-30 and 40,5% percent were between 31-40. 1514 Pnar Gngr / Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 By education level, undergraduate respondents were the most with 77% respond rate, graduate were 21% and respondents with academy degree were 12%. In terms of work period, % 54,3 of respondents were 1-5 years employees, %28,4 were 5-10 years and %14,7 were 10-15 years. According to job title, %31,9 of respondents were supervisors, %30,2 were directors, %25 were assistant supervisors. 4. Data Analysis and Hypotheses Testing Table 2. KMO and Bartlett's Test REWARD MANAGEMENT SYSTEM APPLICATIONS Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity 0,718 Approx. Chi-Square df Sig. MOTIVATION Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity 55 0 0,797 Approx. Chi-Square df Sig. EMPLOYEE PERFORMANCE Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity 457,520 457,384 78 0 0,823 Approx. Chi-Square df Sig. 184,709 10 0 According to the results of factor analysis, Kaiser-Meyer-Olkin score of Reward Management System Application questions which represents the adequacy of the sample size was found to be 0,718 and Bartlett's Test of Sphericity score is significant at the level of 0,000. On the other hand, Kaiser-MeyerOlkin score of Motivation was found to be 0,79 which is adequate for the sample size of the study. Last factor analysis of Performance questions shows that Keiser-Meyer-Olkin score was 0,823 and Bartlett's Test of Sphericity score was found siginificant at the level of 0,00. (Table 2) Table 3.Reliability Analysis and Factor Analysis results of variables Reward Management Cronbach's Alpha N of Items Factor Loadings System Applications Factor 1(Financial Rewards) Q7 0,765 4 0,868 1515 Pnar Gngr / Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 Q8 0,892 Q9 0,527 Q10 0,752 Factor 2 (Intrinsic Rewards) 0,645 3 Q14 0,687 Q17 0,757 Q18 Factor 3(Non-Financial Rewards) 0,718 0,68 4 Q11 0,701 Q12 0,815 Q13 0,594 Q15 0,586 Motivation Factor 1(Job Satisfaction) 0,867 6 Q25 0,749 Q27 0,737 Q30 0,836 Q31 0,772 Q32 0,797 Q54 Factor 2 (Extrinsic Motivation) 0,813 0,702 4 Q45 0,475 Q47 0,875 Q49 0,842 Q53 Factor 3 (Intrinsic Motivation) 0,477 0,702 3 Q39 0,578 Q41 0,781 Q43 0,848 Employee Performance Factor 1 Q24, Q26, Q28, Q29, Q33 0,816 5 The factor loadings of the items in Table 3 range from 0,475 to 0,892 are acceptable for this research In terms of Reliability Analysis results, Cronbach's Alpha value was appropriate for all the variables (RMSA, Motivation and EP). For Factor 1, 2 and 3 of RMSA questions, Cronbach's Alpha values are range from 0,64 to 0,765 which are acceptable and show the reliability of the factors. Cronbach's Alpha of Factor 1, 2 and 3 of the Motivation questions are range from 0,702 to 0,867. Employee Performance questions contributed in one factor. The consistency of the factor was assured with a 0,816 Cronbach's Alpha value. (Table 3) 1516 Pnar Gngr / Procedia Social and Behavioral Sciences 24 (2011) 1510-1520 Hypothesis 1 In order to attain the relation between the RMSA and EP, a regression analyses was conducted and the results in the Model Summary table showed that the explanatory power of the constructed model ( R Square) was ,203. That means %20,3 variation of the employee performance variable was explained by Financial Rewards variable. According to F value 28,549 and p value 0,000 (sig.) in ANOVA table it is decided to reject Ho hypothesis that means it is significantly possible to predict Employee Performance variable with the independent variable Financial Rewards. After finding the model statistically significant, regression equation was conducted. Before the regression equation t statistics are tested to find the significance of the coefficients. After testing the t statistics it is founded that some of the variables such as Non-Financial and Intrinsic Rewards are found insignificant. Because of this situation the new regression test must be conducted without these vari