Performance management - Essay Example

Studies have revealed that the simplification process has produced results that have not only been conflicting but also ambiguous. Due to the disadvantages stated above, Ferreira & Otley's formulated the performance management framework that clearly describes the operation and structure of performance management system. Researchers have emphasized that to obtain accurate results that are essential in developing skills and knowledge on management performance, it is important to use theoretical foundations.

Managers of an organization need to select rational theories that will guide them when analyzing performance of an organization (Chapman, 2007p. 664). Performance management approach usually involves many processes that take place in an organization. These processes include analysis, measurement, control, and planning. The mechanisms employed in performance management systems are formal and informal controls. The controls are usually dependent on the size of the organization because larger firms use administrative controls (Margret, 2010 p. 210). Performance Management Framework by Otley’s In the year 1999, Otley developed a framework that was to provide a guideline in the study of the operations of management control systems.

He focused on five areas that included identification of the main goals of an organization. . The fourth area that Otley emphasized was the implications of either achieving or failing to achieve the targets set in an organization. Lastly, he focused on monitoring the performance of an organization. Levers of Control framework Simons proposed the levers of control (LOC) framework in the year 1995. These included beliefs, boundary, diagnostic and interactive control systems (Simons, 1995:p177).

Simons’ framework was based on four major concepts especially core values, the risks, the variables of critical performance and strategic uncertainties. The belief system controls the core values while the risks are regulated by the boundary system. The diagnostic control system controls the critical performance variables. The main function of the diagnostic control is to monitor, assess and provide rewards based on the different levels of performance. Lastly, the interactive control system regulates the strategic uncertainties in a company.

The levers of control framework have facilitated the study of the interaction between boundary systems and beliefs (Collier, 2005:p321). The LOC framework was criticized because of its incompatibility with the informal controls that exist in many organizations (Hutzschenreuter, 2009 p.10). However, the employment of LOC framework facilitates the assessment of the balance between positive and negative controls (Ferreira, 2002: 053). The Performance Management Systems Structure The existing frameworks had a number of limitations that prompted researchers to develop an extended framework.

The extensive framework highlights the main aspects of performance management system, and provides foundation for the development of further investigations. The performance management system focused on several areas including organization structure,