The National University of Modern Languages
(Lahore Campus)
Assignment: - Performance Management System
Submitted to: - Ma’am Zulaikha Mehmood
Submitted by: -
Muzammil Khan
L-21225
(MBA 4 Even.)
The role of behavioral factors and national cultures
in creating effective performance management systems
Author: -
André A. de Waal
Introduction: -
Performance management systems refers to the specific procedures, formal activities, and information-
based factors which managers use to maintain or modify patterns in organizational actions. This article
defines the findings of a study into the role of behavioral factors and national culture in setting up an
effective PMS at a multinational called UVD. When, the UVD had recently implemented a new PMS. Yet
UVD’s management had some doubts about whether behavioral and cultural factors had been suitably
taken into account to make sure that organizational members were actually going to use the PMS. UVD
therefore initiated a study into the effectiveness of its PMS with the aim to identify upgrading chances
for the firm’s use of performance management. This article first provides a short introduction to
performance management and the influence of behavioral factors and national culture on performance-
driven behavior.
Behavioral Factors in Performance Management: -
There are three basic factors which effect the performance management system.
• Structural factors
• Behavioral factors
• Cultural factors
The basic purpose of PMS is to observe the behavior of people in the organization towards
accomplishing the results desired by the organization. A PMS should therefore foster performance-
driven behavior. The factors that effect this behavior are structural factors which affect the structure
and content of the PMS. And behavioral factors which affect the actual use of the PMS by people in the
organization and systems related to a PMS such as evaluation and reward systems are cultural factors.
And to drive out the reason why organizational members do not validate performance-driven behavior,
the management should focus at the factors that are influencing the PMS.
Mostly the method should use to measure the degree of performance-driven behavior in an
organization, structural factors, behavioral factors, related systems, and organizational culture, is the
performance management analysis. This usually involves determining critical success factors and key
performance indicators, and designing a balanced scorecard. The PMA enables an organization to
actually assess the degree of performance-driven behavior. After all of the participants in the PMA have
completed the survey, the scores are averaged for each dimension and the results are represented in a
so-called PMA radar diagram. This is done by asking the respondents to compare the performance of
their organization to that of competitors and of organizations with similar services. Such self-assessment
of performance is generally accepted as a reliable method to measure the performance of an
organization, because managers are considered capable of judging whether the use of the PMS has
influenced their performance favorably. The managers should use a PMS if they think that using that
system will be valuable for their organization. The more they expect benefits from using the system, the
more willing they are to use it. This will lead to the actual use of the PMS, and eventually improved
organizational performance.
Influence of National Culture: -
Another factor which is not clearly included in the PMA, is the influence national cultures can have on
performance-driven behavior. Culture has been described as ‘something to do with the people and the
unique quality and style of organization’ or ‘the way we do things around here’.
The national culture is an appropriate factor for the use of performance information in a multinational,
and its influence should be taken into account during the design and implementation of a PMS. And
national culture can be regarded as a behavioral factor, it influences the use of the PMS which in turn
influences the performance-driven behavior of people in the organization.
Uncertainty avoidance:
In cultures with high uncertainty avoidance, people have a tendency to to show their fear of the
unfamiliar through expressive behavior. In cultures with low uncertainty avoidance, people tend to be
less expressive and they don’t show their emotions or anger easily. The core value associated with high
uncertainty avoidance is certainty.
Individualism versus collectivism:
A society is individualistic if the mutual ties between individuals are loose. Everybody is expected to take
care of him or herself and next of relations. In a collectivist society, individuals are institutionalized in
strong, tight groups that offer the individual permanent protection in return for unrestricted loyalty to
the group.
Power distance:
The level to which members of a society accept that institutional power is distributed unequally. In a
country where a large power distance overcomes, few think that people are or should be created equal.
Respect for status and power are core values, and dependents expect to be given orders or directions
rather than act on their own.
Masculinity versus femininity:
A society is masculine if social gender-roles are clearly separated. The men are expected to be self-
confident and hard, aiming at material success. And the women are supposed to be modest and
emotional, aiming at quality of life. And in a feminine society social gender-roles are distorted. The men
as well as women are supposed to be modest, aiming at quality of life.
Time orientation:
Long term orientation stresses persistence, carefulness, shame and status in the long run. Short term
orientation emphasizes calm, protection of face, respect for tradition and rituals.
Research at UVD: -
UVD has an annual turnover of more than 2 billion euros and employs over 1200 people. Each division
has several business units, each of which involves of several profit centers. In addition, support units like
Finance & Control and HR are existing with a mission and a strategy which is supported by its core values
performance orientation, innovation, and progressiveness. The PMS starts with the long-term strategic
planning process which is carried out in the first half of the year, followed by the budgeting process in
the second year-half. The budget forms the basis of the performance contract between each profit
center and the BU it belongs to. Others are center specific and depend on local circumstances. The
scorecard is a mandatory tool used during the quarterly performance review meetings between BU-
management and division. Between profit center and line management these meetings take place
monthly. The process is supported by a range of performance information reports. The goal of these
reports is to give information for internal control purposes, and to be the basis for external stock market
reports. In shortly, it can be specified that the performance management process of UVD is a formal,
detailed and weighty process which takes a lot of time and effort.
Research results and Analysis: -
The PMA radar diagram for the UVD division examined is nearly balanced and all dimensions score in the
range of 5.2 – 6.0 according to the given researched data. And the scores on structural dimensions are
on average the same as those on behavioral dimensions, suggesting that the organization has paid equal
attention to both types of dimensions. And the average standard deviation, a measure for the spread
around the scores indicating whether respondents agree or disagree with each other, is higher for the
behavioral dimensions than for the structural dimensions.
The researched data is also showing different other result aspects: -
• F&C versus line businesses
• Management versus employees
• Correlation between PMA scores and organizational performance
Conclusion: -
After the detailed examine of this case, firstly, the research population is not essentially representative
of the overall UVD organization as the study was carried out at only one of UVD’s divisions. Secondly,
the respondents of the questionnaire may have rated their own unit more favorably than an outsider -
and thus a more objective researcher would have done. Thirdly, there may well be other dimensions
that influence performance-driven behavior, which have not been included in the design of the PMA.
And the research provides an exciting picture of the quality of the PMS of UVD’s division. It can be
concluded that there are many indications that the current PMS is well-balanced and of a good quality.
The PMS has been designed to serve two conflicting purposes, including internal control and external
accountability. The results of the study defined in this article also have values for the PMA itself. As this
analysis tool does not clearly examine the purpose of a PMS. And it indirectly assumes that a PMS is
mostly used for internal control purposes. It would be interesting if similar comparative analyses were
carried out in other organizations in other countries to see if the relation between behavioral factors,
national culture, organizational performance and effective performance management systems also
holds true for these companies.