How performance management affects

employee satisfaction in the coffee shop

industry
- A look into Costa Coffee and Starbucks -
Literature Review

Performance management as a method of reward entirely focused around performance and

results has been theorised to be highly effective as it is underpinned by both positive
reinforcement and by results-oriented management. However, many aspects of performance
management are still being debated, such as its effectiveness (e.g. selectively effective in only
certain areas), criticism such as it being bureaucratic or unrealistic, or the aspects that
determine the success or failure of a performance management programme. A critical aspect
of performance management is its overall effect on job satisfaction. Job satisfaction is
important because it is impacted differently by performance management depending on
reward, performance assessment, individual manager and employee personality. The effect of
performance management is primarily psychological as it offers rewards, sets standards and is
designed to improve performance through incentives (positive through reward and negative
through punishment). As such, understanding employee satisfaction and motivation in
relation to this technique is essential to understanding performance management as a whole
and improving its practice in order to achieve higher levels of productivity.

Wright & Cropanzano (2000) argue that there is a reciprocal relationship between
performance of employee and satisfaction of employee. This suggests that performance
management can have very positive results with regard to satisfaction if the performance of
employees is improved as a result of the process. The quality of the performance management
process is thus the key to high satisfaction and efficiency. While Wright & Cropanzano
(2000) do not directly link job performance and satisfaction, they link psychological well-
being with job satisfaction, and there is also evidence to suggest that better performance leads
to higher rates of psychological well-being. This reciprocity between job satisfaction and
performance has been well documented throughout literature. In their meta-analysis on the
issue, Judge et al. (2001) have found that there is a mean correlation between the two of 0.30
present throughout the 312 studies analysed. As such, there is heavy evidence to suggest the
key to positive effects of performance management is improvement in the performance of
employees as a result.

Fletcher & Williams (1996) describe positive correlations between performance management
and employee attitudes for most aspects. Therefore Fletcher & Williams (1996) point to
elements such as the link between effort and performance, specificity, or feedback to be
highly important to achieving high job satisfaction. Fletcher & Williams (1996) also show
differences between the private and public sectors: aspects such as participation or specificity
are more important in the private sector while feedback is more important in the public sector.
Besides peer competitiveness, all other aspects have had positive effects on hob satisfaction
(Fletcher & Williams, 1996).

The role of culture

With regard to how performance management can be used to improve employee motivation
and lead to higher performance as well as employee satisfaction, DeNisi & Pritchard (2006)
note that there are two critical elements: performance appraisal and motivation-based
performance expectancy. The first element, performance appraisal is essential to be done
correctly in order to link effort with performance and reward (DeNisi & Pritchard, 2006), as
also outlined by Fletcher & Williams (1996). Properly defining performance, training
employees and ensuring they understand expectancies is critical to effective performance
appraisal (DeNisi & Pritchard, 2006). The second element underpins the importance of
correlating performance management with individual employee motivation. Reward and
subsequently employee effort need to be correlated with employee wishes and ensure
employee development as part of the company (DeNisi & Prtichard, 2006).

With regard to the role of culture, both organisational culture and national culture in
modifying the effects of performance management on employee satisfaction, Testa (2009)
notes that cross-cultural management has deep implications that also affect and thus mediate
the relationship between performance management and employee satisfaction. Testa (2009)
points out that the various aspects of cultural and individuality strongly affect the way in
which individuals perceive and respond to performance management. Thomas & Peterson
(2014) notes that to improve performance management and generate a positive response to it,
a leader or team manager should address the issue cross-culturally, and offer advice and
recommendations in a way consistent with the employees national cultural attributes. Rabl et
al. (2014) also suggest national culture has an important role in affecting how well employees
perform, particularly in high performance work systems. Muduli (2011) argues that certain
countries are more susceptible to performance management and reward based on
performance, while others are less susceptible. Others such as Schneider (2004) argue that
performance management and job satisfaction can be inherently linked as well as determined
by culture. In the case of judges in many systems, performance is high without any
performance relative enhancement (Schneider, 2004). This leads to the conclusion that
performance management functions differently depending on not only national culture but
also organisational culture as it is highly dependent on values and norms within the system
(Schneider, 2004). The case described by Schneider (2004) is that of judges who function at
high levels of performance due to social status and the role of setting values and norms in
society. This is testament to the role of culture and job perception in job satisfaction and
performance management (Schneider, 2004).

Naor et al. (2008) also show that performance itself is impacted by culture, and in particular
show that there is a link between organisational culture and manufacturing performance. In
view of the findings of Judge et al. (2001) this leads to the conclusion that national as well as
organisational culture indirectly affects job satisfaction and the process of performance
management. Yousef (2000) argues that leaders do not necessarily play a role in mediating
between national culture and job satisfaction but rather that the link between them is direct.

References

DeNisi, A. S., & Pritchard, R. D. (2006). Performance Appraisal, Performance Management

and Improving Individual Performance: A Motivational Framework. Management &
Organization Review (Wiley-Blackwell), 2(2), 253-277. doi:10.1111/j.1740-
8784.2006.00042.x

Fletcher, C., & Williams, R. (1996). Performance Management, Job Satisfaction and
Organizational Commitment1. British Journal of Management,7(2), 169-179.

Judge, T. A., Thoresen, C. J., Bono, J. E., & Patton, G. K. (2001). The job satisfactionjob
performance relationship: A qualitative and quantitative review.Psychological bulletin, 127(3), 376.
Rabl, T., Jayasinghe, M., Gerhart, B., & Khlmann, T. M. (2014). A Meta-Analysis of Country
Differences in the High-Performance Work System-Business Performance Relationship: The Roles of
National Culture and Managerial Discretion. Journal Of Applied Psychology, 99(6), 1011-1041.
doi:10.1037/a0037712

Muduli, A. (2011). Performance Based Reward and National Culture: An Empirical Evidence from
Indian Culture. Synergy (0973-8819), 9(1), 1-13.

Naor, M., Goldstein, S. M., Linderman, K. W., & Schroeder, R. G. (2008). The Role of Culture as
Driver of Quality Management and Performance: Infrastructure Versus Core Quality Practices.
Decision Sciences, 39(4), 671-702. doi:10.1111/j.1540-5915.2008.00208.x

Schneider, M. (2004). Performance Management by Culture in the National Labor Relations Board's
Division of Judges and the German Labor Courts of Appeal. Journal of Public Administration
Research and Theory: J-PART, (1). 19.

Testa, M. R. (2009). National culture, leadership and citizenship: Implications for cross-cultural
management. International Journal of Hospitality Management, 28(1), 78-85.

Thomas, D. C., & Peterson, M. F. (2014). Cross-cultural management: Essential concepts. Sage
Publications.

Wright, T. A., & Cropanzano, R. (2000). Psychological well-being and job satisfaction as predictors of
job performance. Journal of occupational health psychology, 5(1), 84.

Yousef, D. A. (2000). Organizational commitment: a mediator of the relationships of leadership

behavior with job satisfaction and performance in a non-western country. Journal of Managerial
Psychology, 15(1), 6-24.