4. History of performance management


Astley (1985) says that administrative science is a fundamentally subjective enterprise . 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, Astley's 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.


Individual performance management evolution

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 (221-265AD) rated the performance of the official family members (Banner & Cooke, 1984, Coens & 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 & Cooke, 1984; Wiese & 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. 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, 1999). 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 measure, in an effort to increase the accountability of all employees to the execution of the organisational strategy.


Operational performance management evolution

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 13th 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 ship's captain (Lebas, 1995). However it was only in the early 19th 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 & Anderson , 2008). Thus in the first decade of the 20th 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. Radnor & Barnes (2007) say that Taylor's 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. This newly developed discipline which came to be known as work study, incorporated the study of work methods and the measurement of work In the early 1920s, DuPont and General Motors experimented by introducing decentralized divisional structures with profit centers. As support for these reorganisations they also introduced the DuPont chart and with it the concept of Return On Investment (ROI). This meant that management was now also held responsible for the achievement of budgeted ROI and therefore not only focused on measures such as margin and net income (de Waal , 2002). 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 & Backer, 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).


Strategic performance management evolution

At strategic level, performance management as a discipline has a short history becoming established only in the 20th 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 Peter Drucker's (1946) publication of "Concept of the Corporation". 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.As anticipated by Eccles (1991), the mid 1990s witnesses a performance management revolution, lead by the introduction and metamorphosis of the BSC. Kaplan and Norton introduced 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 organisation's intangible assets (Kaplan and Norton, 1992). Over a span of 17 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 today's standards is considered performance management and vice versa. Overall, strategic performance management is today represented by the BSC, as the most popular system used for strategy execution.

Related Articles

Need help?

Get in touch with our research analyst!

analyst-image Cristina Tărâţă
Head of Research,
The KPI Institute

I can help you find solutions for your strategy and performance issues.

Get in touch
Top 20 KPIs - 2016 Extended Edition
See in Library

PERFORMANCE Magazine - April 2016
See in Library

The Functional Area KPI Dictionary series
See in Library