Performance Appraisal, Performance Management, and Firm-Level Performance: A Review, a Proposed Model, and New Directions for Future Research

There has been a long history in management and industrial/organizational psychology of studying methods to improve performance at work. These efforts have traditionally been concerned with individual-level performance (with some attention paid to team performance as well); even when research began to more broadly consider the topic of performance management instead of just performance appraisal. However, the often unstated assumption was that, if an organization could effectively improve the performance of individual employees, this would accrue to improvements in firm-level performance as well. A review of the literature suggested that this link had never really been established in a direct way. Instead, we found considerable support for relating “bundles” of human resource (HR) practices to firm-level performance, and several models for how these practices could create the transformation from individual-level to firm-level performance. We drew upon several of these models, from somewhat diverse literatures, to propose a model whereby bundles of HR practices, when aligned with the strategic goals of the organization, can be used to create a climate for performance that could transform generic knowledges, skills, and abilities (KSAs) into specific KSAs needed to improve firm-level performance.