Performance Management Theory informig practice


Performance management research is multidisciplinary, being informed by a varied group of complementary disciplines and corresponding theories.


At strategic level, there is a macro view, whose corresponding theme outlines a systemic approach to organisational management. This is supported by organisational theory (Jones, 1995), systems theory (von Bertalanffy, 1973) and contingency theory (Donaldson, 2001) as interrelated theories covering the structural aspects and goal setting theory (Locke, 2004), supporting the organisational performance aspect.


The performance management theories that apply at strategic level are:


Organisational theory

Organisational theory studies organisations as a whole, the way they adapt, the strategies and structures that guide them. Eisenhardt (1985) considers organisational theory to be rational, information based, efficiency oriented, concerned with determinants of control strategy and distinguish between two types of performance evaluation control: behaviour based and outcome based.


The organisational theory:

  • Compares ability to measure behaviors and outcomes.
  • Uses control as a measurement and evaluation process. Reward is implicit.
  • Can reduce divergent preferences through social control.
  • Uses information as a purchasable commodity.

Contingency theory

The contingency theory of organizations has its essence in the paradigm that organizational effectiveness results from fitting characteristics of the organization (structure) to different contingencies such as environment, organizational size and strategy. Overall, various versions of organisational theory emphasize the importance of task characteristics, especially task programmability, to the choice of control strategy. The existence of "people" or social control is as an alternative to control through performance evaluation. In contrast to the classical scholars, most theorists today believe that there is no one best way to organize. What is important is that there be a fit between the organisation's structure, its size, its technology, and the requirements of its environment. This perspective is known as contingency theory (Fiedler, 1964) that contends that the optimal organisation / leadership style is contingent upon various internal and external constraints.


Systems theory

A subset of organisational theory is considered to be systems theory, which includes a series of variations such as von Bertalanffy (1956)’s General Systems Theory, Mulej’s Dialectical Systems Theory, Flood and Jackson (1995)’s Critical Systems Thinking, or Beer's (1984, 1985) Viable Systems Theory.


Systems theory opposes reductionism and promotes holism. Rather than reducing an entity (e.g. the human body) to the properties of its parts or elements (e.g. organs or cells), systems theory focuses on the arrangement of and relations between the parts which connect them into a whole. It emphasises interdependences, interconnectedness and openness as opposed to independence, isolation and closeness. This enables the discovery of emergence, as new attributes of interacting entities that are generated by their analysis as a whole that would not become evident if the parts would be analysed independently.


Systems theory acknowledges complexity as an attribute of reality and focuses on synergy and the combination analysis and synthesis. Systems theory considers organisations as systems with relative boundaries which make exchanges with the environment and must adapt to environmental changes in order to survive. They are open systems which interact directly with the environment through inputs and outputs.


Goal setting theory

Locke & Latham’s (2002) goal-setting theory, one of the most effective motivational theories. It was formulated inductively based on empirical research conducted over nearly four decades. Its roots are based on the premise that conscious goals affect action (where goals are considered the object or aim or an action) (Locke & Latham, 2002). While goal setting theory is generally analysed at individual level, its principles are considered relevant at organisational level, too. Locke (2004) further argues that goal-setting is effective for any task where people have control over their performance. Research in this field currently explores goal setting theory at both individual and organisational level.


In organisational context, personal empirical observations highlight that the goals of individuals, teams and the entity as a whole can be in conflict. Goal conflict can motivate incompatible actions and this has the potential to impact performance. Thus, alignment between individual goals and group goals is important for maximising performance.



  • Brudan, A. (2010), Rediscovering performance management: systems, learning and integration, Measuring Business Excellence, Vol. 14, No. 1, pp. 109-123.
  • Donaldson, L. (2001), The contingency theory of organizations, SAGE.
  • Jones, G., R. (1995)‚ Organizational theory: text and cases, Addison-Wesley Pub.
  • Locke, E., A. & Latham G., P. (2002),  Building a Practically Useful Theory of Goal Setting and Task Motivation, American Psychologist, Vol. 57, No. 9, pp. 705–717.
  • Von Bertalanffy, L. (1973), General System Theory: Foundations, Development, Applications, George Braziller.

Strategic : Theory informing practice


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