, Third Edition
Performance Management
Herman Aguinis
Kelley School of Business
Indiana University
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
,Editorial Director: Sally Yagan
Acquisitions Editor: Brian Mickelson
Director of Editorial Services: Ashley Santora
Director of Marketing: Maggie Moylan
Senior Marketing Manager: Nikki Ayana Jones
Marketing Assistant: Ian Gold
Editorial Project Manager: Sarah Holle
Production Project Manager: Clara Bartunek
Creative Director: Jayne Conte
Cover Designer: Suzanne Behnke
Cover Art: Fotolia: Teamwork © Les Cunliffe
Full-Service Project Management: Kiruthiga Anand,
Integra Software Services Pvt. Ltd.
Printer/Binder: Courier Companies, Inc.
Cover Printer: Lehigh /Phoenix - Hagerstown
Text Font: 10/12 Palatino
Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this
textbook appear on the appropriate page within text.
Copyright © 2013, 2009, 2007 by Pearson Education, Inc., publishing as Prentice Hall. All rights reserved.
Manufactured in the United States of America. This publication is protected by Copyright, and permission
should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or
transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To
obtain permission(s) to use material from this work, please submit a written request to Pearson Education,
Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your
request to 201-236-3290.
Many of the designations by manufacturers and sellers to distinguish their products are claimed as
trademarks. Where those designations appear in this book, and the publisher was aware of a trademark
claim, the designations have been printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Aguinis, Herman
Performance management / Herman Aguinis. — 3rd ed.
p. cm.
ISBN-13: 978-0-13-255638-5 (alk. paper)
ISBN-10: 0-13-255638-3 (alk. paper)
1. Employees—Rating of. 2. Performance—Management. I. Title.
HF5549.5.R3A38 2013
658.3'125—dc23
2011037274
10 9 8 7 6 5 4 3 2 1
ISBN 10: 0-13-255638-3
ISBN 13: 978-0-13-255638-5
, CONTENTS
Preface viii
Acknowledgments xiii
Dedication xiv
About the Author xiv
PART I Strategic and General Considerations 1
Chapter 1 Performance Management and Reward Systems in Context 1
1.1 Definition of Performance Management (PM) 2
1.2 The Performance Management Contribution 4
1.3 Disadvantages/Dangers of Poorly Implemented PM Systems 8
1.4 Definition of Reward Systems 10
1.4.1 Base Pay 10
1.4.2 Cost-of-Living Adjustments and Contingent Pay 11
1.4.3 Short-Term Incentives 11
1.4.4 Long-Term Incentives 11
1.4.5 Income Protection 12
1.4.6 Work/Life Focus 13
1.4.7 Allowances 13
1.4.8 Relational Returns 13
1.5 Aims and Role of PM Systems 14
1.5.1 Strategic Purpose 15
1.5.2 Administrative Purpose 16
1.5.3 Informational Purpose 16
1.5.4 Developmental Purpose 16
1.5.5 Organizational Maintenance Purpose 16
1.5.6 Documentational Purpose 17
1.6 Characteristics of an Ideal PM System 18
1.7 Integration with Other Human Resources and Development
Activities 23
1.8 Performance Management Around the World 24
! CASE STUDY 1-1: Reality Check: Ideal Versus Actual Performance
Management System 28
! CASE STUDY 1-2: Performance Management at Network Solutions, Inc. 31
! CASE STUDY 1-3: Distinguishing Performance Management Systems from
Performance Appraisal Systems 32
Chapter 2 Performance Management Process 37
2.1 Prerequisites 38
2.2 Performance Planning 46
2.2.1 Results 46
2.2.2 Behaviors 46
2.2.3 Development Plan 47 iii
Performance Management
Herman Aguinis
Kelley School of Business
Indiana University
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
,Editorial Director: Sally Yagan
Acquisitions Editor: Brian Mickelson
Director of Editorial Services: Ashley Santora
Director of Marketing: Maggie Moylan
Senior Marketing Manager: Nikki Ayana Jones
Marketing Assistant: Ian Gold
Editorial Project Manager: Sarah Holle
Production Project Manager: Clara Bartunek
Creative Director: Jayne Conte
Cover Designer: Suzanne Behnke
Cover Art: Fotolia: Teamwork © Les Cunliffe
Full-Service Project Management: Kiruthiga Anand,
Integra Software Services Pvt. Ltd.
Printer/Binder: Courier Companies, Inc.
Cover Printer: Lehigh /Phoenix - Hagerstown
Text Font: 10/12 Palatino
Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this
textbook appear on the appropriate page within text.
Copyright © 2013, 2009, 2007 by Pearson Education, Inc., publishing as Prentice Hall. All rights reserved.
Manufactured in the United States of America. This publication is protected by Copyright, and permission
should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or
transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To
obtain permission(s) to use material from this work, please submit a written request to Pearson Education,
Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your
request to 201-236-3290.
Many of the designations by manufacturers and sellers to distinguish their products are claimed as
trademarks. Where those designations appear in this book, and the publisher was aware of a trademark
claim, the designations have been printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Aguinis, Herman
Performance management / Herman Aguinis. — 3rd ed.
p. cm.
ISBN-13: 978-0-13-255638-5 (alk. paper)
ISBN-10: 0-13-255638-3 (alk. paper)
1. Employees—Rating of. 2. Performance—Management. I. Title.
HF5549.5.R3A38 2013
658.3'125—dc23
2011037274
10 9 8 7 6 5 4 3 2 1
ISBN 10: 0-13-255638-3
ISBN 13: 978-0-13-255638-5
, CONTENTS
Preface viii
Acknowledgments xiii
Dedication xiv
About the Author xiv
PART I Strategic and General Considerations 1
Chapter 1 Performance Management and Reward Systems in Context 1
1.1 Definition of Performance Management (PM) 2
1.2 The Performance Management Contribution 4
1.3 Disadvantages/Dangers of Poorly Implemented PM Systems 8
1.4 Definition of Reward Systems 10
1.4.1 Base Pay 10
1.4.2 Cost-of-Living Adjustments and Contingent Pay 11
1.4.3 Short-Term Incentives 11
1.4.4 Long-Term Incentives 11
1.4.5 Income Protection 12
1.4.6 Work/Life Focus 13
1.4.7 Allowances 13
1.4.8 Relational Returns 13
1.5 Aims and Role of PM Systems 14
1.5.1 Strategic Purpose 15
1.5.2 Administrative Purpose 16
1.5.3 Informational Purpose 16
1.5.4 Developmental Purpose 16
1.5.5 Organizational Maintenance Purpose 16
1.5.6 Documentational Purpose 17
1.6 Characteristics of an Ideal PM System 18
1.7 Integration with Other Human Resources and Development
Activities 23
1.8 Performance Management Around the World 24
! CASE STUDY 1-1: Reality Check: Ideal Versus Actual Performance
Management System 28
! CASE STUDY 1-2: Performance Management at Network Solutions, Inc. 31
! CASE STUDY 1-3: Distinguishing Performance Management Systems from
Performance Appraisal Systems 32
Chapter 2 Performance Management Process 37
2.1 Prerequisites 38
2.2 Performance Planning 46
2.2.1 Results 46
2.2.2 Behaviors 46
2.2.3 Development Plan 47 iii
