Implementing a new performance management system within a project-based organization A case study Mei-I Cheng De Montfort University, Leicester, UK Andrew Dainty Loughborough University, Loughborough, UK, and David Moore The Robert Gordon University, Scott Sutherland School, Aberdeen, UK Abstract Purpose ��� The paper seeks to show that implementing change initiatives in organizations is extremely problematic, particularly in relation to human resource management (HRM) initiatives. The challenges inherent in implementing new HRM systems and procedures is arguably more acute in project-based organizations where temporary teams and geographically dispersed employees render the coherent implementation of new systems and procedures problematic. This paper presents the findings of case study research in which the implementation of a new performance management system for improving individual project manager performance is evaluated. A framework is developed for guiding the implementation of similar change initiatives in other project-based organizations. Design/methodology/approach ��� A longitudinal case study methodology was adopted for the study. This enabled the ways in which resistance to change was manifested, and to be explored, and the actions necessary to circumvent barriers to its use discerned. The final framework is derived from a review of change strategies in other industries and sectors as well as from the case study findings. Findings ��� The paper finds that barriers to implementing new performance solutions stemmed from a lack of senior management commitment and support, ingrained working practices and an absence of appropriate training interventions. These are relatively straightforward to overcome as part of a robust implementation framework. Research limitations/implications ��� The assertions made within the paper are based on a single case study. Further work is required to validate the findings within other organizations. Practical implications ��� The posited approach in this paper provides a practical implementation methodology, which may be transferable to other project-led organizations. The framework provides a point of departure for organisations looking for practicable ways of mitigating organizational resistance to performance initiatives, particularly project-oriented businesses, which face additional challenges in terms of delivering coherent change programmes. Originality/value ��� In the paper the practical implementation methodology proposed provides a point of departure for companies considering strategies for successfully implementing performance management tools in the future. Keywords Performance management, Organizational change, United Kingdom Paper type Research paper The current issue and full text archive of this journal is available at www.emeraldinsight.com/1741-0401.htm The project on which this research was based was funded by a grant from the EPSRC. The authors wish to acknowledge the assistance of the construction company who took part in the development of the research on which this paper is based. IJPPM 56,1 60 Received June 2005 Revised February 2006 Accepted March 2006 International Journal of Productivity and Performance Management Vol. 56 No. 1, 2007 pp. 60-75 q Emerald Group Publishing Limited 1741-0401 DOI 10.1108/17410400710717082

Introduction Performance management, in a human resource management (HRM) sense, is the process of delivering sustained success to organizations by improving capabilities of individuals and teams (Armstrong and Baron, 1998). It supports the philosophical principle that people and not capital provide organizations with a competitive advantage (Reynolds and Ablett, 1998). However, performance management presents severe challenges in terms of practical implementation (Bourne et al., 2000). Many managers remain sceptical of researchers���, advice in this area, as previous studies have largely failed to overcome many of the organizational constraints on its successful implementation (Redman, 2001). Overcoming barriers to change is especially important given their close relationship to the fulfilment of the psychological contract and related HRM systems (reward, development, etc.). The psychological contract construct recognises the existence of a ���soft��� set of expectations held by the employee, which have to be organized and managed (Sparrow, 1998). Within the relationship defined by the psychological contract, the employer and the employee inform, negotiate, monitor and then re-negotiate (or exit) the employment relationship. Thus, if the employee feels that a performance management approach breaches or violates their psychological contract expectations this can lead to an irrevocable breakdown in the employment relationship (Robinson and Rousseau, 1994). Careful implementation of performance tools is therefore crucial to their success as contributors to organizational development. This paper reports on case study research analysing the introduction and first year of operation of a new performance management system within a large project-based organization. The aim was to evaluate the success of the implementation process and based on this analysis, to identify learning points, which could inform the implementation of other change initiatives within project-based organizations in the future. The paper begins with a review of the role of performance management in facilitating organizational change and development. Following this, the implementation of a performance management system is examined via a case study of a large organization seeking to develop a new was of managing the development and contribution of its employees. A large construction company provided an experimental arena for exploring the process of implementing performance management systems for this study. The barriers to the implementation of the system emerging over the course of the study are examined and, following a review of how such barriers have been overcome in other sectors, a new framework for implementing performance solutions is developed. The framework provides a point of departure for organisations looking for practicable ways of avoiding organizational resistance to performance initiatives, particularly project-oriented businesses, which face constraints, rooted in short term objectives and temporary involvement structures (Turner, 1998). This work represents the first phase of a research project aimed at developing innovative methodologies for enabling organizational change and transformation within the construction sector. Performance management to support organizational change The ultimate competitive asset of any organization is its people (Band et al., 1994), thus organizations should develop employee competencies in a manner aligned with the organization���s business goals. This can be achieved through performance management systems (Moullin, 2003), which act as both behavioural change tool and enabler of Performance management system 61

improved organizational performance through being instrumental in driving change. This can then be institutionalized through organizational policies, systems and structures. Performance management therefore aims to emphasize and encourage desired and valued behaviours (Risher, 2003), thus is a key tool of communication and motivation within organizations seeking a competitive edge through strategic change and control. Performance management then becomes a system for translating organizational intention and ambition into action and results delivering a strategic goal, such as behavioural change (Band et al., 1994). The system also brings focus to organisational change and development, particularly regarding competencies. When competency profiles support company goals, they become instrumental in developing the human resources necessary to deliver business goals (Parker-Gore, 1996). As a result, performance management system is an important tool for communicating priorities and for providing feedback to stimulate employees to meet the new expectations. Implementing organizational change initiatives: the role of performance management systems Changing individual employee behaviour lies at the heart of organizational change programmes (see, Porras and Robertson, 1992). However, many interventions result in negligible or even negative change within organizations (Matheny, 1998). This is because they ignore or violate established change psychology principles (Winum et al., 1997). Senior management can assume that because they are ready to pro-actively embrace change, their employees will be equally pro-active. However, imposing action on employees who are not prepared results in conflict (Deloitte and Touche, 1996). Typically, only 20 percent of employees in organizations are prepared to take positive action in response to change initiatives (Laforge et al., 1999). Miller (2002) reported that more than 70 percent of new strategic initiatives fail for this reason. Thus, to be successful in shaping behaviour, performance management systems must achieve acceptance by those being ���managed���. Despite the challenges inherent in implementing change programmes, modern organizations need to respond more effectively to changing external and internal environments, and organizational learning has become an important strategic focus. By anticipating and responding to changes in the environment through proactive learning interventions, some organizations are evolving into learning organizations (see Tjepkema and Wognum, 1996). Organizational learning is defined as where learning changes the behaviour of individuals or groups within the organization (Reynolds and Ablett, 1998) and thus is a transformational (rather than transactional) activity yielding tangible benefits. Nonetheless, the question of how to best transform behaviours through organizational learning and development remains. Attempts at solutions have provided frameworks/models of strategic initiatives, which emphasise the outcomes, but pay little attention to the process of implementation. In reality, many change initiatives fail because either organizational cultures are not ready to change at that time, or because they do not anticipate the impact of change on human systems. Initiatives in the latter category typically result in resistance and ultimately failure of the change initiative (Prochaska, 2000). As mentioned earlier, one method that organizations can use to affect employee competencies in a manner aligned with the organization���s change goals is to develop IJPPM 56,1 62