1.

INTRODUCTION
Strategy Evaluation is as significant as strategy formulation because it
throws light on the efficiency and effectiveness of the comprehensive
plans in achieving the desired results. The managers can also assess the
appropriateness of the current strategy in todays dynamic world with
socio-economic, political and technological innovations. Strategic
Evaluation is the final phase of strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate

the task performed by managers, groups, departments etc, through control
of performance. Strategic Evaluation is significant because of various
factors such as - developing inputs for new strategic planning, the urge
for feedback, appraisal and reward, development of the strategic
management process, judging the validity of strategic choice etc.

The process of Strategy Evaluation consists of following steps-

Fixing benchmark of performance - While fixing the benchmark,

strategists encounter questions such as - what benchmarks to set, how to
set them and how to express them. In order to determine the benchmark
performance to be set, it is essential to discover the special requirements
for performing the main task. The performance indicator that best identify
and express the special requirements might then be determined to be used
for evaluation. The organization can use both quantitative and qualitative
criteria for comprehensive assessment of performance. Quantitative
criteria includes determination of net profit, ROI, earning per share, cost
of production, rate of employee turnover etc. Among the Qualitative
factors are subjective evaluation of factors such as - skills and
competencies, risk taking potential, flexibility etc.
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 Measurement of performance - The standard performance is a bench
mark with which the actual performance is to be compared. The reporting
and communication system help in measuring the performance. If
appropriate means are available for measuring the performance and if the
standards are set in the right manner, strategy evaluation becomes easier.
But various factors such as managers contribution are difficult to
measure. Similarly divisional performance is sometimes difficult to
measure as compared to individual performance. Thus, variable
objectives must be created against which measurement of performance
can be done. The measurement must be done at right time else evaluation
will not meet its purpose. For measuring the performance, financial
statements like - balance sheet, profit and loss account must be prepared
on an annual basis.

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 Taking Corrective Action - Once the deviation in performance is
identified, it is essential to plan for a corrective action. If the performance
is consistently less than the desired performance, the strategists must
carry a detailed analysis of the factors responsible for such performance.
If the strategists discover that the organizational potential does not match
with the performance requirements, then the standards must be lowered.
Another rare and drastic corrective action is reformulating the strategy
which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and
consequent means going to the beginning point of strategic management
process.

Performance criteria, performance indicators, benchmarks, and the

measurement criteria associated with them may be specified on the basis
of any of the following:

Performance evaluation criteria should be timely and accurate – systems

of management control should be capable of indicating deviations from
plan or standard promptly and accurately, so that there is no disagreement
about the nature and timing of the remedial action that needs to be taken.

Performance evaluation criteria should be understandable – if systems of

management control are clearly understood by all of the staff involved in
their application, they are more likely to be effectively and speedily
implemented.

Performance evaluation criteria should be realistic – where projected

plans and standards of performance are seen as being realistic by all those
involved in their application, there is a greater likelihood of their being

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attained. Systems of performance evaluation are instead likely to be
treated with scepticism if they are based on unrealistic standards of
performance, unrealistic measurement criteria, or unrealistic expectations
of corrective or remedial action. This is in particular a problem for
healthcare agencies where the level of external expectation may become
incompatible with the likely patient treatment outcomes that can be
achieved within any given level of available resources.

Performance evaluation criteria should be attainable – systems of

management control based upon unattainable objectives or unachievable
standards of performance are also likely to be treated with scepticism.
The degree to which plans and performance standards are unattainable
might for instance be a function of the following:-

 the organizational and communication relationship (or “distance”)

between planners and implementers. Planners who set objectives
and strategies in isolation from the realities of implementation and
control may succeed only in establishing unattainable standards.

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 They maximize the “planning-control gap” (for instance as
described by Machin and Wilson, 1979). The generals of the first
world war, for example, planned military campaigns in isolation
from the catastrophic consequences of their implementation on the
battlefield. This issue was dealt with in Chapter 11.
 a lack of control over the resources or assets required to meet the
standards laid down. Enterprise leadership cannot hope to meet
performance standards laid down for operational activities if there
is no effective control over the resources needed to achieve these
standards.

Although developing strategic and operational plans is a difficult and

complicated process, their successful implementation is much more
difficult. Many organizations fail in the full implementation of their
strategies. This is not due to the partial definition of strategies and
organization’s operational plan, but this is likely due to the lack of strong
framework for creating alignment between employees and operational
process and the organizational goals. To implement strategies effectively
and to develop a comprehensive management system and to improve the
performance, Robert Kaplan and David Norton introduced a modern
management system which is Balanced ScoreCard. Likewise they

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introduced five main criteria: leadership, translation, alignment, every
day process and ongoing process for a strategy oriented organization.
This paper is intended to offer a systematic approach for measuring the
effectiveness and efficiency of the strategic plan performance. For this
study the questionnaire was distributed in a project- orientated service
organization and after collection, by the use of statistical. Analysis
especially factor analysis the grouping of sub-criteria under the five main
criteria was confirmed. The statistical analysis showed that, two criteria
of alignment and every day work had the lowest scores in terms of both
implementation and effectiveness in the organization’s senior and
executive manager’s point of view. With deep interview, studying of
scorecards and meeting of the strategic committee of the studied
organization, the two dimension of alignment and every day work were
further examined and after identifying upgradeable areas, some
suggestions for improving the effectiveness and efficiency of the studied
organization were presented.

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 2. OBJECTIVES

A performance evaluation is not merely a chat about how well an

employee is doing. It’s an opportunity for you to educate and motivate as
well as evaluate your personnel. If you have a strategy going into a
performance review, you can improve the quality of your workforce and
the efficiency of your business. Make a plan before you sit down with an
employee so that the performance review will actually upgrade the
employee’s performance.

Checklist

Consider bringing a checklist to the evaluation. This is a rundown of all

the positive behaviors the employee has shown, the areas that need
improvement and possible goals to discuss during the meeting. Using
such a checklist will keep you focused on the purpose of the evaluation so
that you don't get distracted by topics that come up in conversation. The
checklist can certainly include a set of questions to ask the employee.
These questions can be designed to elicit the employee's evaluation of
herself, and they can provide an opportunity for her to raise any issues
about her job. The strategy of using a checklist ensures that your
evaluations will be purposeful.

Documentation

Part of your strategy should be to document the employee's progress. You

can do this by bringing a copy of previous evaluations as well as the copy
of the job description including tasks and skills associated with the job.
Such documentation keeps the conversation from wandering off into
vague opinions and expectations and can keep both you and the employee
focused on factual descriptions of the kind of performance necessary for
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the job. The strategy of bringing documentation can help keep your
appraisal and suggestions concrete.

Managing Employee Perceptions

One of your strategies should be to appraise the employee's self-appraisal.

Every employee has good reason to cast his performance in the best light.
While you don't need to become confrontational, you can give your
professional opinion of the employee's self-appraisal so that your worker
has the benefit of your managerial perspective. Getting employees to see
their jobs as managers do is a strategy that can help create thoughtful,
self-aware employees.

Relating Performance to Profitability

Employees naturally want to make as much money as possible for

themselves. One strategy you can use in a performance evaluation is to
relate the employee's activities to the profitability of the company.
Explain that every employee should make enough money for the
company to pay her own salary and leave enough left over for profit. Ask
the employee to explain how she contributes to company profitability or
show her how she does. When employees think in terms of not just
making money for themselves but also making money for the company,
you are likely to have a more conscientious workforce.

Strategic management differs from day-to-day operational management

in that it attempts to create long-term corporate outcome goals, rather
than departmental performance goals. Strategic goals might include
diversification, adding a new market segment, reducing debt, controlling
costs, or improving and maintaining the quality of your workforce. To

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evaluate the success of your strategic plans, create a six-step management
process that helps you note objective benchmarks.

Evaluating Management Strategies

To determine whether you are reaching your strategic goals, on schedule

and on budget, or whether you need to make adjustments, create a step-
by-step process that helps you review your performance. The first step is
to set specific strategic goals, such as expanding into a new market
segment. Once you’ve set a goal, create the steps for doing so. After you
know how you’re going to pursue your goals, set deadlines and budget as
benchmarks. Review your performance monthly or quarterly as the fourth
step in your evaluation process to determine how you are progressing
toward achieving your strategic goals. When you see where you stand,
perform an assessment to determine why you are where you are. After
your assessment, take steps to adjust your processes.

Performance appraisals are tools used by companies and employees to

help gauge the value of the employee's performance, and determine how
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performance can be improved. The effectiveness of a performance
appraisal can be judged in how well it achieves its strategic objectives.
Understanding the strategic objectives in performance appraisals can help
you to adapt performance evaluations to meet company needs.

Improving Morale

Morale is an important factor in creating a productive workforce.

According to the article "Performance Appraisal" on the managerial
resource Changing Minds, when performance appraisals are properly
executed they can improve company morale and create motivation for
employees. By working with employees to identify the weak points in
their job performance and then helping to create a plan to combat that
weakness, managers are setting a tone with employees that can create a
positive feeling toward the company and its goals. This is why it is a
good idea to emphasize the positive in performance reviews, and then
turn negatives into positives by developing a course of action to assist
employee development.

Budgeting Tool

According to the Food and Agricultural Organization of the United

Nations, a performance appraisal should be used as an important
budgeting tool for a business. Through the analysis of performance
appraisals, the company can determine which employees are due for a
raise, and which employees are not. These considerations need to be
added to the following year's budget. Other performance appraisals may
require the termination of employees, and that causes two budgetary
considerations to come into play. First of all, the money associated with
having the terminated employees is put back into the annual budget.

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However, there are also budget considerations for replacing terminated
employees as well. The company needs to decide if the employees will be
replaced, and if there would be a benefit in paying a higher salary to a
more experience candidate, or if hiring a lower cost entry-level employee
will better serve the company's strategic goals.

Set Goals

One of the important parts of strategic objectives is reaching company

goals. These can be metrics established for performance, or a percentage
increase in revenue dollars. A performance evaluation should be a time
for the manager and employee to discuss the professional development of
the employee, and establish strategic goals that will be used to measure
that development. The employee and manager can work together on the
success of the employee and raise the employee-manager relationship to a
more effective working level.

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 3. SCOPE OF STUDY

Depending on the nature of the organization, the scope of performance

review varies. Commonly, however, the scope of performance review
encompasses the following aspects:

 Job performance—Considers meeting goals and developing

mutually decided standards.
 Working relationships—This aspect focusses on maintaining
professional relationships with co-workers, subordinates, and
managers.
 Core job skills—Emphasizes on the normative aspects of job,
including its skill and competencies.

A business strategy outlines the areas and approaches to achieving

competitive advantage. It determines the scope and priorities of company
intentions – what to do, where to do it, what to become and how to
achieve it? The strategy identifies the objectives and direction that
managers and employees at every level should follow in order to define
their work and the organisation to be successful. Despite the relatively
lengthy period of time (3-5 years) and the resources and energy invested
in implementing the strategy, the many companies’ efforts fail to produce
the desired results.  An international study conducted by the consultancy
agency Marakon Associates states that companies achieve only 63% of
the financial parameters set out in their strategies. The reason for this lies
in insufficient flexibility and ability to adapt to changes. Under conditions
of globalization and constant pressure for transformation, strategic goals
cannot be attained through routine actions within a static organisational
structure and idle potential. This forces management to look for new
solutions and improvise within the scope of the goals set in order to

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achieve competitive advantage. The most important factors for achieving
strategic success include: continuous improvement of human resources,
employees’ commitment and motivation, improving performance and
achieving organisational effectiveness. 

Performance management is not a sporadic event but a strategic set of

management policies and concrete actions. It is a systematic process
resulting in constantly improving organisational effectiveness. It
contributes to the effective management of individuals and teams in order
to achieve high levels of organisational performance. Performance
management establishes shared understanding about what is to be
achieved and what approach is to be used to integrate and combine
different policies and management systems in the organisation so as to
achieve the strategic goals. The approaches to completing this process
cannot be copied; they are specific and depend on the context of the
internal and external environment in which the company operates.
Performance management is a management practice which includes the
following phases:

1. Planning work (setting goals, expectations and performance

standards)
2. Monitoring performance and providing feedback
3. Developing the capacity to perform successfully
4. Rating performance regularly
5. Rewarding and encouraging good performance

In performance management managers use various tools, policies and

systems to help employees unleash their potential and be successful at
their jobs, Some of these are:

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  Employee orientation programs
 Coaching and mentoring
 Techniques and procedures for control (monitoring) and feedback
 Delegation techniques
 Competence models and performance management tools
 Systems for needs assessment and use of targeted development and
training programs
 Performance assessment
 Procedures for rewarding and stimulating (motivating)
 Internal communication systems
 Performance-based remuneration systems
 Career and succession management systems;
 Talent management systems
 Empathy building policies
 Culture management programs

With regard to the performance management system, the competence

framework provides guidance for determining the levels for performance
evaluation and allows for the development of performance management
goals.

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The implementation of the competence-based approach in the process of
work performance management results in higher employee productivity,
motivation, commitment and satisfaction, higher individual and team
effectiveness and achievement of the results desired bythe organisation.

MyCompetence provides a methodology, standards and specific tools to

support the process of performance management and to increase
employees’ competence and efficiency:

 Sector competence models (competence classifiers and resources

for acquiring and developing competencies)
 Models of key jobs in various economic sectors including a
framework of competencies necessary for performing successfully
at these jobs
 Technology and procedure for the development of a company job
profile
 Competence assessment and job matching tools
 E-training for key competencies

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  Strategic evaluation is an important tool for assessing how well
your business has performed, relative to its goals. It's an important
way to reflect on achievements and shortcomings, and is also
useful for reexamining the goals themselves, which may have been
set at a different time, under different circumstances.

Setting Goals

Although the actual evaluation step takes place at the end of the process,
after goals have been reached or not, the process of strategic evaluation
starts at the beginning of the process, with the step of setting the goals
themselves. Goals are important because they give your company
direction, and a way to measure success. Effective goals should be
tangible steps that move your company toward achieving its longer term
mission and vision, such as improving the environment, alleviating
suffering or simply making money. Unlike your company's mission and
vision, its goals should be specific and quantifiable, such as increasing
sales by a certain percentage during a specific period of time.

Measuring Performance

Your goals provide you with criteria and benchmarks, and the process of
measuring your performance involves taking a step back and assessing
how effectively your company has achieved its goals. Measuring
performance is an important step in the strategic evaluation process
because it provides a snapshot of the outcomes you have achieved
relative to the milestones you created. When you've set clear and
quantifiable goals at the outset, its easy to see and measure how well you
have performed relative to these objectives.

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A monitoring plan should start with the end in mind; what do we want to
know?  This could be based upon:

 reporting requirements; “we need to communicate program

progress with the board on a monthly basis”;
 quality requirement; “we need to know if a defect variance of
greater than 2% exists within our products”
 business requirements; “we need to know if our member base
drops below 10,000”
 risk requirements; “we need to know if this risk rating reaches
above 17”
 client needs, legislation and a multitude of other factors.

It is important to establish what is important, what we are going to

monitor, how it will be monitored, by whom and the frequency.  These
aspects form the basis of most monitoring plans.

Review plans are similar to monitoring plans; they provide for an analysis
of the actual performance against the baseline or agreed benchmarks. 
The difference normally lies in the fact that whilst monitoring occurs
concurrent to the program, reviews are generally associated with being
performed at the conclusion of a stage, gate or project.

Monitoring is generally the inspection to report, control and where

required take corrective active actions to bring the performance to plan;
or in some cases adapt the plan.  Reviewing is a retrospective analysis of
performance where causation factors (reasons) are identified and linked
to deviations from expectations. The review is looking at past information
to improve future situations.

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18
 4. FEATURES

A strategy is an action plan which sets the direction that a company will
be taking. It is a decision-making choice and would involve consideration
for internal strengths and weaknesses and external environment affecting
the company. Strategy was earlier used for military manoeuvring etc. but
now it is used in organizations too. In a business set up. a planner should
see the plans and policies of his competitors and then modify or re-adjust
his plans so that he may prove the superiority of his product or service.
Strategy can also be used in the sense that it helps in the determination of
organizational objectives and the deployment of resources of achieving
them.

In the words of Learned et. al. “Strategy is the pattern of objectives,

purposes, or goals, stated in such a way as to define what business the
company is in or is to be in and the kind of company it is or is to be.”
Chandler has given a more explicit definition when he says. “Strategy is
the determination of basic long-term goals and objectives of an
enterprise, the adoption of course of action and the allocation of resources
necessary for carrying out these goals.

A strategy is a broad plan for bringing the organization from the present
position to the desired position in future. The questions like; Where is the
organization now? Where does it want to go in future? What should be
done to take it there?

(i) Strategies consist of general programme of action to be perused for

achieving organizational goals.

(ii) Strategy involves choices that determine the nature and direction of
the organization’s activities towards the attainment of goals.
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(iii) Strategies include tactics used by the opponents. They are meant not
only to achieve business goals but also to counter certain steps taken by
the competitors.

(iv) Strategy is a right combination of both internal and external factors.

The strengths and weaknesses of the organization and the likely impact of
external factors should be analyzed before deciding a policy for the
future.

(v) Strategies are never static. They have to be modified or changed as

per the needs of the situation.

(vi) Strategies may involve even contradictory action. Since they depend
upon many variable factors, a manager may take an action today and may
reverse it tomorrow depending upon the situation.

(vii) Strategy is forward looking. Its orientation will be towards future.

The past actions can be used as a guideline for future decisions.

(viii)) Strategies are formulated only at the top level management. Lower
level management is only expected to execute them.

1. Clarifying Business Objectives and Values:

Business strategies are linked to the mission and values followed by a

company. A mission is the expressed purpose for which the business has
been set up. It should be clearly defined and communicated to the
members. All managerial decisions will be taken with reference to the
objectives of the organization and strategies will be formulated to achieve
them.

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The objectives provide guidelines for making strategies at various levels
in the organization. The values used in the company also help in which
way the strategies will be framed. The understanding about the likely
customers and the type of their needs the company will satisfy should be
kept in mind at the time of making strategies.

2. Appraisal of External Environment:

The external environment consists of economic, technological, marketing,

political and social factors prevailing at that time. All those factors have a
direct bearing on the business and all business plans and strategies will be
framed in order to benefit maximum from the existing environment.

There is a need of continuous monitoring of external environment and its

likely impact on the business. For example, a business may reduce cost of
production by using improved technology, there may be new threat from
competitors at the same time. There should be a. constant thinking on
how to deal with likely external factors. Management should establish a
system of forecasting, monitoring and evaluating external environment so
that timely strategies may be formed for converting threats into
opportunities.

3. Appraisal of Internal Environment:

An appraisal of internal environment will help in knowing the strengths

and weaknesses of the organization. Unless otherwise a detailed review
of various activities is undertaken it will not be possible to frame proper
strategies. For example, the company may have a good marketing net
work but production activity may not be able to cope with it.

When these things are clear to the decision-makers, they will certainly try
to adjust these imbalances and take advantage of favourable factors and
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improve those which are lacking behind. The internal environment which
needs appraisal include marketing, production, financial, human
resources. A proper assessment of these areas should be undertaken so
that corrective measures are taken where necessary.

4. Examining Alternative Strategies:

There should be a proper matching between external and internal factors.

The organizational strengths and weakness should he kept in mind while
studying the impact of external environment. There may be a gap
between the desired results and actual performance. In order to fill this
gap some alternative strategies are required.

The pros and cons of alternative strategies should be assessed so that

these may be employed in case of need. For example, a company wants to
expand its business, a strategy may be to increase production by extra
utilization of existing production facilities or by adding more machines.
An alternative strategy may be to acquire a unit producing same type of
product. It will be necessary to evaluate carefully the alternative strategy
against predetermined criteria.

5. Choice of Strategy:

The choice of a suitable strategy is an important step in strategy

formation. Various alternative strategies are analyzed and their strengths
in achieving organizational goals are assessed. While making choice of a
strategy the factors such as degree of risk acceptable to the management,
results achieved from past strategy, response of owners, values and
preferences of top management and timing of the strategy should be taken
into account. Any selection of a wrong strategy can create problems for

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the company. The final choice of a strategy should be a well thought
decision.

Evaluation of Strategies:

The success of organization will depend upon a number of factors

including strategies. The formulation of strategies is an important task of
top management. It will be equally important to see whether strategies
have really benefited the business or not.

The following yardsticks may be employed to see the success or failure of

strategies:

1. Consistency in Organization:

A strategy should help in creating consistency in the organization. Every

business has a number of policies, programmes, rules, etc. for smooth
running of the business. The strategies should fit into the internal
organization without disturbing other aspects. They should not be
inconsistent with other things like policies etc.

2. Suitable in Environment:

Strategy should be suitable to the environment existing outside the

organization. The working of the business will certainly be influenced by
what is happening outside it. Strategy should be in conformity with the
prevailing situation. It should both be static and dynamic so that it adjusts
under the changing environment.

3. Suitable for the Resources:

The strategy should be in conformity with the resources available. A

strategy requiring more resources than the business can afford will not be

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successful. The resources may be in the form of money and physical
facilities. A strategy will be successful only if it involves the available
resources and nothing more.

4. Degree of Risk:

The strategy should also take into consideration the risk element in it. The
amount of resources committed will determine the degree of risk. How
much resources are required at present and what will the commitments in
future should be both taken into account. High risk strategies may even
present threat to existence if the things go wrong. The strategy should be
such which does not create threat to the existence of the concern.

5. Workability:

The workability of a strategy will be judged by the results obtained. The

working of a strategy will depend upon its proper implementation also. Its
success can also be judged by its contribution towards organizational
goals. The strategy will be successful only if it has helped in improving
organizational performance.

Successful Implementation of Strategies:

It is one thing to formulate good strategies but it is another thing to

ensure their implementation.

Following steps should be kept in mind while implementing strategies:

1. Proper Communication of Strategies:

The first thing in implementing strategies is their proper communication

to decision-making managers. Unless otherwise the strategies are
communicated and understood in the same way in which planners want,

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the same will not give desired results. The chief executive officer or top
level planners may be clear about the strategies and the results expected
but if the same thing is not communicated properly then the objectives
may not be achieved.

2. Developing and Communicating Planning Premises:

Planning premises are the anticipated environmental factors in which

plans are expected to operate. Some assumptions have to be made while
planning for future. Managers must develop premises critical to plans and
decisions and explain them to all those who are in the chain of decision-
making. In the absence of such premises, decisions will be based on
personal assumptions and predictions and it may lead to uncoordinated
plans.

3. Reviewing Strategies Regularly:

The strategies should be reviewed regularly. There may be a change in

conditions or assumptions in which these were based. Unless strategies
are changed to suit the new conditions, there will be no use of persisting
with the old ones. The regular review of strategies will help in their
update.

4. Developing Contingency Strategies:

There is always a possibility of change in competitive factors or other

elements in the environment may occur, strategies for such contingencies
should be formulated. One cannot wait for the certainty of the
environment. Even if there is uncertainty and the events may make
objectives and programmes absolute, a manager has to proceed on the
most credible set of premises possible at that time. The contingency
plans, if available, will help in such situations.

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5. Organization Structures be Suitable to Planning Needs:

The organization structure should be designed to help managers

accomplish goals and make decisions to put plans into effect. If possible,
each person should be responsible for the accomplishment of each goal
and implement the strategies to achieve this goal. The key areas and end
results should be identified and assigned to single position as far down
the organization structure as is feasible. This type of organisation
structure will help in making the strategies more effective and result
oriented.

6. Emphasis on Strategy Implementation:

The managers should continuously emphasize the decision-makers to

implement planning and strategies. Even though this is a tedious task to
say the same thing regularly but it will certainly have desired results.
Making a good strategy and then ignoring its implementation will amount
to nothing.

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 5. ADVANTAGES

 They provide a document of employee performance over a specific

period of time.
 They provide a structure where a manager can meet and discuss
performance with an employee.
 They allow a manager the opportunity to provide the employee
with feedback about their performance and discuss how well the
employee goals were accomplished.
 They provide a structured process for an employee to clarify
expectations and discuss issues with their manager.
 They provide a structure for thinking through and planning the
upcoming year and developing employee goals.
 They can motivate employees if supported by a good merit
increase and compensation system.

Strategic evaluation occurs as the final step in the final step in a strategic
management cycle. Without it, a business has no way to gauge whether or
not strategic management strategies and plans are fulfilling business
objectives. Strategic management attempts to coordinate and bring
business resources and actions in line with the mission and vision of the
business. Strategic plans outline the action steps necessary for achieving
strategic business goals.

Why Evaluate?

Strategic evaluations provide an objective method for testing the

efficiency and effectiveness of business strategies, as well as a way to
determine whether the strategy being implemented is moving the business
toward its intended strategic objectives. Evaluations also can help identify

27
when and what corrective actions are necessary to bring performance
back in line with business objectives.

Performance Measurement

Strategic evaluations start by defining a performance ideal according to

business objectives. This performance ideal includes both qualitative and
quantitative performance benchmarks to which actual performance of the
business as a whole and the performance of individual employees can be
compared. Qualitative benchmarks are subjective factors such as skills,
competencies and flexibility. Quantitative benchmarks include “hard
facts” such as net profit, earnings per share of stock or staff turnover
rates.

Ongoing Analysis

Strategic evaluations work under the assumption that because the

business environment is fluid and constantly changing, variances will
commonly exist between ideal and actual performance. Regular strategic
evaluations provide an objective, effective way for a business to evaluate,
analyze and modify performance expectations. A positive variance can
tell a business what it’s doing right and confirm it’s on the right track
while a negative variance can be a signal that the performance of
management and staff needs to change.

Corrective Actions

When strategic evaluations pinpoint areas where the business is not

meeting strategic objectives, corrective actions can attempt to solve the
problem. For example, if a business discovers strategic technical
objectives are not being met because employees do not have up-to-date

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qualifications, the business can design training programs that bring
skillsets in line with technical objectives. If a business discovers the
business objective itself is out of line – such as overly aggressive sales
expectations – it can take steps to modify the objective and bring it line
with real-life potential.

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 6. DISADVANTAGES

 If not done right, they can create a negative experience.

 Performance appraisals are very time consuming and can be
overwhelming to managers with many employees.
 They are based on human assessment and are subject to rater errors
and biases.
 Can be a waste of time if not done appropriately.
 They can create a very stressful environment for
everyone involved.

Finally, performance appraisals are only as good as the performance

management system it operates within.  Organizations that only do
performance appraisals for the sake of doing them are wasting their time.

But organizations that incorporate performance appraisals into a

comprehensive performance management system and use them to
implement business goals have an advantage for accomplishing their
goals and ultimately their strategic plan.

30
 7. RESEARCH METHODOLOGY

A significant challenge for many organizations is the ability to implement

or execute strategic plan initiatives. Once a plan is developed, and
accountability assigned, it is important to establish measures of
performance that will be reviewed regularly to assess performance. There
are a number of methods for evaluating the effectiveness of strategic
business initiatives. These include: strategic management and evaluation,
SWOT, Porter's Five Forces and the Balanced Scorecard.

Strategic Management and Evaluation

Strategic management evaluation is the process by which organizations

put in place measurement processes to evaluate their performance in key
areas. The value of strategic planning is not, of course, in the planning --
but in the execution of the plan and the plan's effectiveness. Once a plan
is developed, individuals will be assigned accountability for plan
elements, metrics of performance will be established based on goals and
objectives, and regular reporting periods will provide an opportunity to
assess the effectiveness of the plan.

SWOT Analysis

The SWOT (strengths, weaknesses, opportunities, threats) analysis is an

evaluation method used by organizations during strategic planning to help
them identify and prioritize the internal and external impacts that affect
them. Strengths and weaknesses are internal -- weaknesses and threats are
external. Organizations will develop strategies to leverage or capitalize on
their strengths and opportunities, and minimize or overcome their
weaknesses and threats. A brainstorming process is used to develop a list

31
for each of these area; the list is later evaluated and prioritized to identify
the top key contributing factors for each.

Porter's Five Forces

Michael Porter is the namesake for the Porter's Five Forces evaluation
method used by organizations to help formulate their strategic plans. The
five forces include: the threat of new competition, the availability of
substitute products or service, the bargaining power of customers, the
bargaining power of suppliers and the intensity of competitors. By
considering these five forces, organizations are able to detect
environmental impacts that could both help and hinder their own strategic
planning efforts.

Balanced Scorecard

The balanced scorecard is a tool that simplifies the communication aspect

of strategic planning evaluation by providing a visual format for
indicating whether -- and to what extent -- performance expectations are
being met. Scorecards are balanced in that they consider the interplay
between financial, customer, learning and growth, and business process
activities. Performance is depicted in charts -- or scorecards -- that allow
plan reviewers to quickly determine whether measures are
underperforming, meeting or exceeding expectations. Scorecards provide
a simple summary of performance across all key areas that have been
identified as critical to the organization's performance.

An important question when the Evaluation Plan and/or the Terms of

Reference are being developed is what type of evaluation the programme
would like to perform. Evaluation can be of a more strategic character,

32
thematic, cross-programme or operational. An evaluation could also be a
combination of these. Several possibilities are mentioned here:

A: Strategic evaluation: A strategic evaluation generally focuses on the

longer term and includes the broader policy context to decide on current
or future strategic decisions. An example would be to see how the
programme is contributing to the (revised) Lisbon Agenda. A strategic
evaluation generally investigates the programme's relevance and also its
effectiveness.

B: Thematic evaluation: A thematic evaluation focuses on a specific

theme, such as innovation or equal opportunities. Thematic evaluations
mostly look at the effectiveness and relevance of the programme.

C: Cross-programme evaluation: A cross-programme evaluation focuses

on several programmes, e.g. all transnational programmes, or all
territorial programmes in the Danube area, or several programmes who
would all like to evaluate e.g. monitoring procedures. A cross-programme
evaluation can be focussed on one or more of the key evaluation issues:
relevance, effectiveness and efficiency.

D: Operational evaluation: An operational evaluation deals with

operational issues such as application procedures or performance of the
programme. In an operational evaluation the efficiency and effectiveness
of the programme will be the central focus.
These types of evaluation are often performed in combination. For
example:

 A thematic cross-programme evaluation could focus on innovation

in several programmes;

33
  An operational cross-programme evaluation would look at
operational aspects of several programmes, such as the
performance of the indicators in several programmes.

The diagram below shows when which type of evaluation can be used.
For example, a strategic evaluation will look more at content-related
issues (relevance, effectiveness and/or consistency). A thematic
evaluation is also very much content-related and will therefore deal with
relevance, effectiveness and/or consistency of the theme. A cross-
programme evaluation can be of a more strategic and content-related
character, theme-oriented and/or operational. Finally, an operational
evaluation will deal more with the efficiency, effectiveness and/or
consistency issues.

Diagram showing when which types of evaluation can be used

A strategic evaluation will generally include a policy analysis, interviews

or workshops with policy-makers and/or members of the Monitoring
Committee. Fundamental research, for example on the future of
innovation in relation to Territorial Cooperation programmes, could be
part of a strategic evaluation. For instance, the North Sea programme in
2004 developed several studies to investigate which elements needed
attention in the short and long term.

34
Important elements of a strategic evaluation are:

 The continuing relevance and consistency of the Operational

Programme;
 The contribution of the programme to broader European objectives
such as the (revised) Lisbon Agenda.

Thematic evaluations are the best opportunity for programmes to

investigate whether a specific topic or thematic area will need more or
less attention in the current or next programme. The aim of a thematic
evaluation could be one of the following:

 Offering a comprehensive picture for further analysis of combined

effects of other policy tools outside the cohesion policy;
 Supporting coherence and relevance of strategies;
 Checking the effectiveness of the programmes. Are the objectives
of specific current priorities and operations being met?
 Checking the relevance of the programme. Is the programme still
relevant? (This would be a strategic thematic evaluation.)
 Checking the consistency of the programme.

There are several reasons why a cross-programme evaluation could be

useful:

 Increased objectivity, transparency and independence of the

evaluation. Higher credibility.
 Better understanding of similarities/differences between
programmes. Better understanding of programme-specific
strengths.

35
 Fostering common understanding of thematic priorities to support
future strategic programming decisions (e.g. strategic projects).
 Avoiding duplication of effort (enabling a single evaluation of an
aspect which occurs in several Operational Programmes).
 Capturing interaction between Operational Programmes.
 Reduction of the overall number of evaluations. Combining
evaluation resources to achieve more and reduce costs and
resources for individual programmes.
 Possibility to address broader evaluation questions in geographic or
thematic terms (i.e. larger regions and/or wider scope). Facilitating
a perspective on multi-programme impacts beyond the results of
individual programmes.
 Learning between partners: sharing evaluation techniques.
 Objectivity and increasing the legitimacy of findings: joint working
increases objectivity, transparency and independence of the
evaluation and strengthens impact.
 Broad participation increases ownership of findings and makes
follow-up on recommendations more likely.
 Harmonisation and reduced costs: limiting the number of
evaluation messages, fostering consensus on upcoming priorities.
 Broader scope: joint evaluation can address broader evaluation
questions and facilitate a perspective on multi-agency impacts
beyond the results of one individual programme.

36
 8. LIMITATION
In rapidly changing environments that characterize most industries today,
organizations face intense competitive pressure to do things better, faster
and cheaper. The business environment of the new century has undergone
rapid and accelerating change, creating more and more uncertainty and
complexity. Most markets are becoming increasingly dynamic.
Companies compete in this fierce environment to achieve a sustainable
competitive advantage, positioning itself strategically in their industries
or developing durable and distinctive firm capabilities and resources or
through knowledge and innovation. Organizations can no longer rely on
traditional analytical approach to understanding their industry or market,
since the economic landscape is changing quickly and unexpectedly.
Organizations are challenged to develop new organizational
characteristics such as flexibility or expertise in order to quickly respond
to changes in technology, competition and customer preferences. The use
of large investments in systems and information technology (IS/IT) has
been one of the solutions found by organizations to deal with these
markets. These investments, which in most cases represent a significant
expenditure of financial resources, have failed to bring the expected
benefits. Nowadays, the importance of intangible assets is higher than
traditional physical assets and performance measurement tools need to
capture this new reality. Balanced Scorecard (BSC) is an innovative
approach that considers the financial and non- financial perspectives in
determining the performance level of organization, and not only
represents a measurement tool, but it is also a multi dimensional system
of performance management. Although, it’s worldwide dissemination,
BSC has demonstrated inadequacy in certain circumstances, namely, in
dynamic environments. The authors advocate a combination of various

37
tools and approaches to set up and align the firm´s strategy instead of
being statically hostage of an evaluation framework.

Performance measurement is a politically powerful but analytical diffuse

concept. Its meanings and implementation can vary from forcing
fundamental changes in the ways in which public sector organizations
and assessed and thus public funds allocated, as evinced by recent state
government initiatives across all levels of U.S. education, to constituting
old wine in new bottles, especially to empirically oriented economists,
program evaluators and those weaned in the days of program-planning-
budgeting.

Addressing this analytical diffuseness, this paper assesses the promises

and limitations of performance measures as means of measuring
economic and other returns of the Federal government’s investments in
basic and applied research. Referring to promises and limitations in the
same sentence implies differences in perspectives and assessments about
the relevance, reliability, validity, transparency, and suitability of
performance measures to guide decision making. These differences exist.
A stylized dichotomization is as follows:

 endorsement of requirements for, belief in, scholarly search

supportive of, and opportunistic provision of performance
measures that respond or cater to executive and legislative branch
expectations or hopes that such measures will facilitate evidence-
based decision-making;
 research and experientially based assessment that even when well
done and used by adepts, performance measures at best provide
limited guidance for future expenditure decisions and at worst are

38
 rife with potential for incorrect, faddish, chimerical, and
counterproductive decisions.

The tensions created by these differences are best captured by the

observation of Grover Cleveland, 22d and 24 th President of the United
States: “It’s a condition we confront — not a theory.” The condition is the
set of Congressional and Executive requirements upon Federal agencies
to specify performance goals and to provide evidence, preferably in
quantitative form, that advances towards these goals have been made. The
set includes by now familiar legislation such as the Government
Performance and Results (GPRA) Act of 1993, the Government
Performance and Results Modernization Act of 2010, and requirements of
the 2009 American Recovery and Reinvestment Act’s (ARRA) that
Federal agencies provide evidence that their expenditures under the Act
have stimulated job creation. It also includes comparable Executive
branch directives. These include the Bush II Administration’s articulation
in 2002 of R and D Investment Criteria, subsequent implementation of
these criteria by the Office of Management and Budget (OMB) via its
Performance Assessment Rating Tool (PART) procedures, and the
Obama Administration’s 2009 OMB memorandum on Science and
Technology Priorities for the FY 2011 Budget, that states that “Agencies
should develop outcome-oriented goals for their science and technology
activities…”, and “… develop science of science policy” tools that can
improve management of their research and development portfolios and
better assess the impact of their science and technology investments.” To
these formal requirements may be added recent and likely increasing
demands by congressional authorization and appropriations committees
that agencies produce quantitative evidence that their activities have
produced results, or impacts.

39
Theory here stands for a more complex, bifurcated situation, creating
what Manski has termed dueling certitudes: internally consistent lines of
policy analysis that lead to sharply contradictory predictions. (Manski,
2010). One theoretical branch is the currently dominant new public sector
management paradigm branch. This paradigm emphasizes strategic
planning, accountability, measurement, and transparency across all public
sector functions, leading to, and requiring the use of evidence as the basis
for informed decision making (OECD, 2005; Kettl, 1997).

The second branch is the accumulated and emerging theoretical and

empirical body of knowledge on the dynamics of scientific inquiry and
the processes and channels by which public sector support of research
produces societal impacts. This body of knowledge performs a dual role.
Its findings undergird many of the conceptualizations and expectations
that policymakers have of the magnitude and characteristics of the returns
to public investments in research and of the ways in which these returns
can (or should) be measured. However, it is also a major source of the
cautions, caveats, and concerns expressed by agency personnel, scientists,
and large segments of the academic and science policy research

40
communities that efforts to formally employ performance measures to
measure public returns (of whatever form) to research and to then tie
support for research to such measures are overly optimistic, if not
chimerical, and rife with the potential for counterproductive and perverse
consequences.

It is in the context of these differing perspectives that this paper is

written. Its central thesis is that the promises and limitations of
performance impact measures as forms of evidence relate to the decision-
making context in which they are used. Context here means who is asking
what type of question(s) with respect to what type of decision(s) and for
what purpose(s). It also means the organizational characteristics of the
Federal agency—can the activities of its operators be observed, and can
the results of these activities be observed? (Wilson, 1989, pp. 158–171).

This emphasis on context produces a kaleidoscopic assessment, such that

promises and limitations change shape and hues as the decision and
organizational contexts shift. An emphasis on context also highlights the
analytical and policy risks of assessing the promises and limitations of
performance impact measures in terms of stylized characteristics.
Performance measures for example can be used for several different
purposes, such as monitoring, benchmarking, evaluation, foresight, and
advocacy (making a case) (Gault, 2010). Consistent with the STEP-
COSEPUP workshop’s stated objective to provide expert guidance to
Federal policymakers in the Executive and Legislative branches about
what is known and what needs to be better known about how to assess
economic and other returns to Federal investments in science and
technology—the paper’s focus is mainly on evaluation, although it segues
at times into the other functions.

41
Approached in this way, performance is a noun, not an adjective. It also is
a synonym for impact. This strict construction is made to separate the
following analysis from the larger, often looser language associated with
the topic in which performance is an adjective, as in the setting of
strategic or annual (performance) goals called for by GPRA; as an
indicator of current, changed or comparative (benchmarking) position, as
employed for example in the National Science Foundation’s biennial
Science and Engineering Indicators reports; or as symptomatic measures
of the health/vitality/position of facets of the U.S. science, technology
and innovation enterprise, as represented for example in Rising Above
the Gathering Storm (2007), where they are employed as evidence that
things are amiss or deficient —a performance gap—in the state of the
world.

The paper proceeds in a sequential, if accelerated manner. Section II

contains a brief literature review and an outline of the paper’s bounded
scope. Section III presents a general discussion of the promises and
limitations of performance measures to assess the impacts of Federal
investments in research. Section IV illustrates the specific forms of the
promises and limitations of performance measures in the context of what
it terms the “big” and “small” questions in contemporary U.S. science
policy. Section V offers a personal, “bottom line” perspective on what all
this means.

42
 9. LITERATURE REVIEW

Today's business world is more complex and has uncertain conditions

which influence the companies to create effective strategies for the
dynamic market. Considering these complicated conditions and
processes, performance measurement has become a popular concept in
strategic management.

In this study, a company operating in the seafood industry in Izmir was

analyzed. As measurement indicators the data about working hours, the
amount of faulty products and the production capacity of workers and etc.
were taken for analysis. The study aims to investigate these indicators in
detail and state the critical factors that influence the performance of this
company. Data were compared with each other and with average
production rates in the sector. The results obtained from the study will be
presented to the managers to improve their production process.

 Performance measurement is a (necessary) means towards

implementing (and enforcing) the audit precepts – especially those
linked to accountability and transparency–contained within GPRA
and like requirements.
 Performance measures can assist agencies make improved,
evidence-based decisions both for purposes of program design and
operations (formative evaluations) and longer term assessments of
allocative and distributive impacts ( summative evaluations). In
these ways, performance measures assist agencies in formulating
more clearly defined, realistic, and relevant strategic objectives and
in better adjusting ongoing program operations to program
objectives.

43
 Well defined, readily measured, and easily communicated
performance measures aids both funders and performers to
communicate the accomplishments and contributions of the public
investments to larger constituencies, thereby maintaining and
strengthening the basis of long term public support of these
investments.
 The search for measures that accurately depict what an
agency/program has accomplished may serve as a focusing device,
guiding attention to the shortcomings of existing data sets and thus
to investments in obtaining improved data.
 Performance measurement focuses attention on the end objectives
of public policy, on what has happened or happening outside the
black box, rather than on the churning of processes and
relationships inside the black box. This interior churning produces
intermediate outputs and outcomes (e.g., papers, patents) that may
be valued by performers (or their institutions, stakeholders, or local
representatives), but these outputs and outcomes do not necessarily
connect in a timely, effective, or efficient manner to the goals that
legitimize and galvanize public support.
 Requiring agencies to set forth explicit performance research goals
that can be vetted for their societal importance and to then
document that their activities produced results commensurate with
these goals rather than some diminished or alternative set of
outputs and outcomes is a safeguard against complacency on the
part of funders and performers that what might have been true, or
worked in the past, is not necessarily the case today, or tomorrow.
Jones, for example, has recently noted, “Given that science is
change, one may generally imagine that the institutions that are
efficient in supporting science at one point in time may be less
44
 appropriate at a later point in time and that science policy, like
science itself, must evolve and continually be retuned” (Jones,
2010, p. 3). Measurement of impacts is one means of
systematically attending to the consequences of this evolution.
 Performance measurement is a potential prophylactic against the
episodic cold fusion-type viruses that have beset the formulation of
U.S. science policy. As illustrated by the continuing debates set off
by Birch’s claims on the disproportionate role of small firms as
sources of job creation (cf. Haltiwanger, J., R. Jarmin, and J.
Miranda (2010)) or the challenge posed to the reflexive proposition
that the single investigator mode of support is the single best way
to foster creative science by Borner, et.al. findings that “Teams
increasingly dominate solo scientists in the product of high-impact,
highly cited science; (Borner, et. al. 2010, p. 1), U.S. science and
innovation policy contains several examples of Will Roger’s
observation that, “It isn’t what we don’t know that gives us trouble,
it’s what we know that ain’t so.”
 Presented as a method of assessing returns to Federal investments
in research, performance measurement provides policymakers and
performers with an expanded, more flexible and adaptable set of
measures than implied by rate of return or equivalent benefit-cost
calculations. Criticism of what is seen as undue reliance on these
latter approaches is longstanding; they are based in part on
technical matters, especially in the monetization of non-market
outputs, but also on the distance between the form that an agency’s
research output may take and the form needed for this output to
have market or other societal impacts.

45
The largest promise of performance measurement, though, likely arises
not from recitation of the maxims of the new public management but
from the intellectual ferment now underway in developing new and
improved data on the internal processes of scientific and technological
research, the interrelationships of variables within the black box, and
improved methods for assembling, distilling and presenting data. Much of
this ferment, of course, relates to Dr. Marburger’s call for a new science
of science policy, the activities of the National Science and Technology
Committee’s (NSTC) Committee on Science, and the research currently
being supported by the National Science Foundation’s Science of Science
and Innovation Policy program (SciSIP). No attempt is made here to
present a full précis of the work underway (Lane, 2010). Having been a
co-organizer, along with Al Teich, of two AAAS workshops at which
SciSIP grantees presented their preliminary findings and interacted with
Federal agency personnel, however, it is a professional pleasure to predict
that a substantial replenishment and modernization of the intellectual
capital underlying existing Federal research policies and investments can
be expected.

To illustrate though the nature of recent advances, I cite two

developments non-randomly selected to reflect the focus of my own
research interests. They are the NSF’s Business R and D and Innovation
Survey (BRDIS), itself in part redesigned in response to the 2005 NRC
study, Measuring Research and Development Expenditures in the U.S.
Economy, and advances in the visualization of the (bibliometric)
interconnections of disciplines. The NRC report articulated longstanding
concerns that NSF’s existing survey of industrial R and D needed
methodological upgrading, lagged behind the structure of the U.S.
economy in not adequately covering the growth of the service sector or

46
the internationalization of sources and performers of R and D, and did not
adequately connect R and D expenditures with downstream “impact”
measures, such as innovations. The result has been a major revision of
these surveys, undertaken by NSF’s Science Resources Statistics
Division.

Early findings from the new BRDIS survey on the sources and
characteristics of industrial innovation fill a long recognized data gap in
our understanding of relationships between and among several variables,
including private and public R and D expenditures, firm size and
industrial structure, human capital formation and mobility, and
managerial strategies. (Boroush, 2010). Combined with pending findings
from a number of ongoing SciSIP projects and juxtaposed to and
compared with data available from ongoing international surveys, these
newly available data hold promise of simultaneously providing
policymakers with a finer grained assessment of the comparative and
competitive position of the technological performance of the U.S.
economy and researchers and evaluators finer grained data to assess the
impacts of selected science and technology program and test existing and
emerging theories.

Science is a set of interconnected, increasingly converging disciplines, so

run the claims of many scientists (Sharp, et. al, 2011). But precisely in
what ways and with what force do these interconnections flow? Does
each field influence all other fields and with equal force, or are there
discernible, predictable differences in patterns of connection and
influence? Prospectively, being able to answer these questions would
provide policymakers with evidence about relative priorities in funding
fields of science, presumably giving highest priority to those that served
as hubs from which other fields drew intellectual energy. Recent research
47
in data visualization, illustrated by Boyack, Klavans, and Borner’s
Mapping the Backbone of Science (2005), combines bibliometric
techniques, network theories, and data visualization techniques to offer
increasingly accessible “maps” of the structure of the natural and social
sciences, thereby providing one type of answer to these questions.

48
 10. FINDINGS

The Office of Personnel Management (OPM) requested this study in

preparation for reauthorization hearings, scheduled for 1991, on the
troubled Performance Management and Recognition System (PMRS).
Our charge was to review the research on performance appraisal and on
its use in linking compensation to performance. To supplement the
research findings, we were asked to look at private-sector practice as
well, to see if there are successful compensation systems based on
performance appraisal that might provide guidance for policy makers in
reforming PMRS. We construed this charge as requiring an investigation
of whether and under what conditions performance appraisal in the
context of merit pay systems could assist the federal government in
managing performance, fostering employee equity, improving individual
and organizational effectiveness, providing consistent and predictable
personnel costs, and—not least—enhancing the legitimacy of public
service.

The Civil Service Reform Act (CSRA) of 1978 provides the backdrop for
this study. That act required the development of job-related and objective
performance appraisal systems, the results of which were to be used as a
basis for training, promotion, reduction in grade, removal, and other
personnel decisions. The act also created performance-based
compensation systems for middle and senior managers. Designed to
revitalize the civil service, in part by bringing private-sector management
strategies to the federal bureaucracy, the reforms have by most measures
fallen short of expectations, despite fairly substantial midcourse
corrections. Yet the belief in merit principles remains strong, as does the

49
expectation that performance appraisal and linking compensation to
performance can provide incentives for excellence.

Policy makers already have extensive documentation of the problems and

employee dissatisfactions with the Merit Pay System (MPS) and the
successor PMRS: consistent underfunding of the merit pool, the lag of
merit salaries behind the salaries of employees still under the General
Schedule, the widely held and annually reinforced belief that federal
salaries have fallen far behind their private-sector equivalents, and the
perceived politicization of the civil service and the merit pay system that
seemed to be an outgrowth of the Civil Service Reform Act. This study is
intended to supplement that knowledge and experience with information
drawn from the private sector, beginning with a systematic investigation
of the research on performance appraisal and pay for performance
systems and including an assessment of private-sector practices in the
years since the passage of the Civil Service Reform Act.

We began the report with a cautionary note about the difficulties inherent
in trying to measure social phenomena in general, and about the particular
evidentiary obstacles presented by the subject at hand (Chapter 3). Our
research has taken us into the literature of a variety of disciplines as we
tried to piece together from fragmentary evidence the best possible
scientific understanding of the adequacy of performance appraisal as a
basis for making personnel decisions and of the effectiveness of using
pay to improve performance. Investigation of the effects of linking
compensation to performance led us from the question of individual
effectiveness to organizational effectiveness and required an examination
of both merit and variable pay plans. Recent research trends also
broadened the scope of the study beyond measurement instruments and
appraisal processes to an examination of context and the attempt to
50
identify conditions under which performance appraisal and merit plans
operate best.

In the course of our investigations it became clear that the theoretical and
empirical literatures have posited at least four different types of benefits
in discussing performance-based pay systems: (1) positive effects on the
work behaviors of individual employees (including decisions to join an
organization, attend, perform, and remain); (2) increased organization-
level effectiveness; (3) facilitating socialization and communication; and
(4) enhancing the perceived legitimacy of an organization to important
internal and external constituencies.

We have been ecumenical in pulling together evidence and information

that speak to these criteria for gauging the effectiveness of an
organization's performance appraisal and pay systems. The preceding
pages have taken account of theory, empirical research, and clinical
studies not only from many disciplines, but also from any research topics
that seemed relevant. The formal evidence has been supplemented with
information about current practices in private-sector firms.

The study's findings and conclusions are presented in this chapter as

follows. The first section deals with the science and practice of
performance appraisal, focusing first on measurement research, then on
applied research, and ending with overall findings and conclusions. The
second section covers performance-based pay systems, focusing first on
evidence from research, then on findings from practice, and again ending
with overall findings and conclusions. The third section deals with the
influence of context on performance appraisal and merit pay systems. The
fourth section deals with the implications of the study's findings and
conclusions for federal policy making.

51
The evaluation of workers' performance is directed toward two
fundamental goals. The first of these is to create a measure that accurately
assesses the level of an individual's performance on something called the
job. The second is to create a performance measurement system that will
advance one or more operational functions in an organization: personnel
decisions, compensation policy, communication of organizational
objectives, and facilitation of employee performance.

Although all performance appraisal systems encompass both goals, the

two are represented in the literature by two distinct, albeit overlapping,
lines of development in theory and research. In part the difference in
approach to performance appraisal reflects disciplinary orientation, in
part historical development. One approach grows out of psychometrics
and the measurement tradition, with its emphasis on standardization,
objective measurement, psychometric properties (validity, reliability,
bias, etc.). The other comes from the more applied fields—human
resource management, industrial and organizational psychology,
organization science, sociology—and focuses on the organizational
context and the usefulness of performance appraisal for such things as
promoting communication between managers and employees; clarifying
organizational goals and performance expectations; providing
information for managers to guide retention, dismissal, and promotion
decisions; informing performance-based pay decisions; and motivating
employees.

Both research fields are interested in the use of rating scales to evaluate
job performance, although they have tended to focus on different
questions and have different expectations of performance appraisal. At
the risk of overemphasizing the distinctions, we have presented our
discussion in this report in two parts, one focused on the measurement
52
research, the second on the applied research. It is, however, a matter of
general orientation, not unrelated polarities.

Of the two goals, accuracy and organizational utility, most of the research
in the measurement tradition has concentrated on aspects of accuracy, the
implicit assumption being that if the measures are accurate, the functional
goals will be met. Research in the more applied fields tends to focus not
on the measurement instrument and the accuracy of inferences drawn
from the measurement, but on the whole operational system of which it is
a part. The applied or management perspective tends to evaluate the
performance measurement component by how well the whole operates,
e.g., whether the system distributes pay as it was designed to, whether the
system is accepted by all players. Accuracy of performance measurement
tends to be ignored, not because it is considered unimportant, but because
it is assumed, at least implicitly, that if the system-level criteria are met,
then the measurement component must be sufficiently accurate.

Apart from our own convenience in presenting findings from the

measurement and applied traditions separately, it is important that federal
policy makers, managers' groups, and employees understand these
differences and tailor their language and expectations appropriately.
Current federal policy is couched in the language of the measurement
tradition. In the manner of the 1978 Uniform Guidelines on Employee
Selection Procedures, which elaborates the requirements of Title VII of
the Civil Rights Act of 1964, Office of Personnel Management
regulations implementing the Civil Service Reform Act of 1978 called on
federal agencies to develop job-related and objective performance
appraisal systems. The regulations required that performance standards
and critical job elements be specified consistent with the duties and
responsibilities outlined in an employee's position description. OPM
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suggested that performance standards be based on a job analysis to
identify the critical elements of a job, and that each agency develop a
method for evaluating its system to ensure its validity. Although courts
have not demanded of performance appraisal systems the degree of rigor
required of tests and other selection instruments, the terms validity,
objectivity, and job-relatedness are all drawn from the context of
psychological testing and performance measurement.

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 11. SUGGESTION / RECOMMENDATION

Performance evaluations, which provide employers with an opportunity

to assess their employees’ contributions to the organization, are essential
to developing a powerful work team. Yet in some practices, physicians
and practice managers put performance evaluations on the back burner,
often because of the time involved and the difficulties of critiquing
employees with whom they work closely. The benefits of performance
evaluations outweigh these challenges, though. When done as part of a
performance evaluation system that includes a standard evaluation form,
standard performance measures, guidelines for delivering feedback, and
disciplinary procedures, performance evaluations can enforce the
acceptable boundaries of performance, promote staff recognition and
effective communication and motivate individuals to do their best for
themselves and the practice.

The primary goals of a performance evaluation system are to provide an

equitable measurement of an employee’s contribution to the workforce,
produce accurate appraisal documentation to protect both the employee
and employer, and obtain a high level of quality and quantity in the work
produced. To create a performance evaluation system in your practice,
follow these five steps:

1. Develop an evaluation form.

2. Identify performance measures.

3. Set guidelines for feedback.

4. Create disciplinary and termination procedures.

5. Set an evaluation schedule.

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It is also advisable to run the finished system by your attorney to identify
any potential legal problems that should be fixed.

Performance evaluations should be conducted fairly, consistently and

objectively to protect your employees’ interests and to protect your
practice from legal liability. One way to ensure consistency is to use a
standard evaluation form for each evaluation. The form you use should
focus only on the essential job performance areas. Limiting these areas of
focus makes the assessment more meaningful and relevant and allows
you and the employee to address the issues that matter most. You don’t
need to cover every detail of an employee’s performance in an evaluation.

For most staff positions, the job performance areas that should be
included on a performance evaluation form are job knowledge and skills,
quality of work, quantity of work, work habits and attitude. In each area,
the appraiser should have a range of descriptors to choose from (e.g., far
below requirements, below requirements, meets requirements, exceeds
requirements, far exceeds requirements). Depending on how specific the
descriptors are, it’s often important that the appraiser also have space on
the form to provide the reasoning behind his or her rating.

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 12. CONCLUSION
In order to get the most out of their employees, the appraisal process
should include listening, observing, giving constructive feedback, and
providing recognition. Most performance management solutions include
writing assistants and coaching tools to help managers find just the “right
words” to give constructive analysis of the employee’s performance. The
most important part of the appraisal is to provide feedback about what the
employee has successfully learned and still needs to learn and create a
plan to provide the opportunity for the employee to develop those
necessary skills. This can be an important factor not only in the
employee's growth, but also in the health of the entire organization since
employees have a greater sense of loyalty to companies that develop
talent from within and thus become more engaged in their work. These
development plans also allows the company to create a pool of talent for
strategic succession planning.

A successful pay-for-performance compensation strategy can be the key

to retaining your top talent and driving organizational performance that
exceeds all expectations. At its core, pay-for-performance serves to align
your people with the goals and objectives of the company and motivate
and reward your top performers, while continuing to develop the under
performers to become greater assets to your organization.

It is important for an employee to know that if his or her work

performance meets or exceeds expectations that he or she will be
rewarded for the hard work appropriately through pay raises, bonuses or
other rewards (flexible schedule or time-off, gifts, recognition through
awards, etc.) Pay for performance compensation structures not only

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account for the individual, but also for the working environment and
performance of the team as well, encouraging the employees to band
together to reach the common goal.

The influence of strategy can be seen in every age and in every area of
industry. Here are some examples:

From the time it was started in 1911 as the Computing-Tabulating-

Recording Co., International Business Machines Corporation has
demonstrated the significance of a soundly conceived strategy. Seeing
itself in the data-system business at a time when most manufacturers were
still preoccupied with individual pieces of equipment, IBM developed a
set of policies which resulted in its dominating the office equipment
industry.

By contrast, Packard in the 1930’s was to the automobile industry

everything that IBM is today to the office machine industry. In 1937, it
sold over 109,000 cars, compared with about 11,000 for Cadillac. By
1954 it had disappeared as an independent producer.

Strategy is, of course, not the only factor determining a company’s

success or failure. The competence of its managerial leadership is
significant as well. Luck can be a factor, too (although often what people
call good luck is really the product of good strategy). But a valid strategy
can gain extraordinary results for the company whose general level of
competence is only average. And, conversely, the most inspiring leaders
who are locked into an inappropriate strategy will have to exert their full
competence and energy merely in order to keep from losing ground.

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When Hannibal inflicted the humiliating defeat on the Roman army at
Cannae in 216 b.c., he led a ragged band against soldiers who were in
possession of superior arms, better training, and competent “noncoms.”
His strategy, however, was so superior that all of those advantages proved
to be relatively insignificant. Similarly, when Jacob Borowsky made
Lestoil the hottest-selling detergent in New England some years ago, he
was performing a similar feat—relying on strategy to battle competition
with superior resources.

A strategy is a set of goals and major policies. The definition is as simple

as that. But while the notion of a strategy is extremely easy to grasp,
working out an agreed-upon statement for a given company can be a
fundamental contribution to the organization’s future success.

In order to develop such a statement, managers must be able to identify

precisely what is meant by a goal and what is meant by a major policy.
Otherwise, the process of strategy determination may degenerate into
what it so often becomes—the solemn recording of platitudes, useless for
either the clarification of direction or the achievement of consensus.

In order to state what a company expects to achieve, it is important to

state what it hopes to do with respect to its environment. For instance:

Ernest Breech, chairman of the board of the Ford Motor Company, said
that the strategy formulated by his company in 1946 was based on a
desire “to hold our own in what we foresaw would be a rich but hotly
competitive market.”2 The view of the environment implicit in this
statement is unmistakable: an expanding overall demand, increasing

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competition, and emphasis on market share as a measure of performance
against competitors.

Clearly, a statement of what a company hopes to achieve may be much

more varied and complex than can be contained in a single sentence. This
will be especially true for those managers who are sophisticated enough
to perceive that a company operates in more external “systems” than the
market. The firm is part not only of a market but also of an industry, the
community, the economy, and other systems. In each case there are
unique relationships to observe (e.g., with competitors, municipal leaders,
Congress, and so on). A more complete discussion of this point is
contained in a previous HBR article.

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 13. BIBLIOGRAPHY
http://smallbusiness.chron.com/strategic-objectives-performance-
appraisals-1915.html
https://www.successfactors.com/en_us/lp/articles/automate-performance-
management.html
https://www.nap.edu/read/1751/chapter/10
http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1807-
17752014000100169
https://www.aafp.org/fpm/2003/0300/p43.html
https://www.ncbi.nlm.nih.gov/books/NBK83132/
https://www.researchgate.net/publication/260479716_Advantages_and_li
mitations_of_performance_measurement_tools_The_balanced_scorecard
http://wiki.interact-eu.net/pages/viewpage.action?pageId=23756931

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