Standardized testing has been a cornerstone of American culture for decades (Himelfarb, 2019). When the average American adult thinks about standardized testing they correlate it with the high school exit exam and other grade school evaluations. However, on average, adults participate in standardized testing annually through their employer (Howard, 2021; Prowse, 2009). This form of standardized testing is most commonly referred to as performance management which includes the performance appraisal process.

As a Learning & Organizational Development Practitioner, I am tasked with developing a unique organization-wide process for performance management to be deployed in early 2023. With that, after learning about standardized testing, it seems to me to be very similar to the traditional performance management process. Therefore, throughout this paper we will review historical articles on performance management, standardized testing, and evaluations to better understand development of the current process through history and theory. Implications and suggestions for further research will be applicable to learning and organizational development practitioners, human resources personnel, and those who perform these assessments as part of their career.

Standardized testing has been around for centuries, beginning in the third century (Himelfarb, 2019). It wasn’t until the early 1900’s that the practice mirrored what we are used to seeing today (Himelfarb, 2019). In 1904, Dr. Binet “was tasked (with) identifying children who required special education” (Himelfarb, 2019, p.152). The result was a standardized 30-question test that was piloted in World War I (Himelfarb, 2019). During the 20th century, the use of the standardized test expanded to college admissions (De Champlain, 2010; Himelfarb, 2019). Now, “in the 21st century, standardized tests are one with American culture…used to tighten gates in the face of limited resources” (Himelfarb, 2019, p.152).

Since then, standardized testing has surpassed its use as a tool for measurement and now is used as a way to label people as “bright or not bright, as academically worthy or not'' (Himelfarb, 2019, p.152). In other words, Himelfarb (2019) describes standardized testing as a tool to gatekeep information from those who are not within a certain group. In sum, one could stretch this sentiment into standardized testing being a tool for white supremacy (Himelfarb, 2019).

As standardized testing became more and more popular it led to new discoveries, like psychometrics (Himelfarb, 2019). “Psychometrics is a field that combines psychology, statistics, and education” (Himelfarb, 2019, p.152). When a standardized test is administered, it uses two scales; “measurement and classification” (Himelfarb, 2019, p.152). Regardless of the type of measurement used, the goal is to assess individual performance and classification on a scale (Himelfarb, 2019). Therefore, because of the broad definition, the average performance management system can be categorized as a general standardized assessment (Armstrong, 2000; Himelfarb, 2019).

After their debut in the 1960’s as management control systems, performance management became the cultural norm during the 1980’s (Armstrong, 2000; Ferreira & Otley, 2009). The bell curve, or calibration process, is a common component of successful performance management systems (Grabner et al., 2020). In that, although everyone on a team may be performing above and beyond they are required to be placed on a curve for equity purposes (Grabner et al., 2020).

Fig 1: Performance management calibration process from SAP SuccessFactors (SAP Human Resources, 2018)

As shown in Figure 1, performance is typically measured through manager observation of the employee or portfolio review. Additionally, self-reflection is often involved. All this said, why have we been doing it the same way for so long? Numerous advancements have been made in our lifetime, surely there is a better way to analyze employee performance. As a learning and organizational development practitioner currently tasked with elevating the performance management system for my company, I constantly wonder if the age-old process is the best.

Management Control Systems (MCSs) debuted in 1965 as a way for managers to ensure efficient use of resources (Ferreira & Otley, 2009). However, there was a disconnect between “operational control and strategic planning” (Ferreira & Otley, 2009, p.264). Some organizations viewed the MCSs as a way to ensure accountability between the organization and their stakeholders (Ferreira & Otley, 2009). The term “Performance Management System” is an evolved perspective on the MCS that includes informal information to assist in understanding (Ferreira & Otley, 2009).

Performance Management Systems (PMSs) became popular in the 1980’s as part of the human resource management practice (Armstrong, 2000). The goal of the performance management process is to ultimately connect individual employee goals to the organizational strategy in an effort to propel performance forward (Armstrong, 2000). Typically, this approach utilizes objectives as a way to gauge performance (Armstrong, 2000). For example, the organization has a goal to increase X through strategy Y, managers would make X their destination and Y the roadmap. Thus, employees under these managers would make a piece of X their objective, within their sphere of influence. Likewise, objectives needed to be adjusted for each person, function, and organizational culture as they could be too lofty or too easy (Armstrong, 2000).

Objective-focused performance management has changed over the years to form OKRs, or Objectives and Key Results (Armstrong, 2000). Objectives represent the organizational strategy and the employee’s alignment to them while key results include specific accomplishments that help the organization reach their goals (Armstrong, 2000). This makes way for the performance appraisal, which is typically a piece of the organizational performance management system. (See Figure 2.)

Fig 2: Armstrongs performance appraisal process. (Armstrong, 2000, p.71)

As shown in Figure 2, feedback is critical and the performance appraisal is a way to ensure that takes place. The performance appraisal is a comparison between the desired outcome and the actual outcome in relation to the OKRs (Armstrong, 2000). If an employee does not perform at the desired level, action is taken by the supervisor/manager (Armstrong, 2000). Typically, employee performance is judged by their direct manager/supervisor on their personal attributes and skills necessary to do the job (Armstrong, 2000). For example, executing sound judgment when operating heavy machinery, their judgment is a personal attribute and operating heavy machinery correctly is a skill. Managers use performance management to assess employee skills and competencies (Armstrong, 2022).

Those evaluating performance, in the 1980’s - early 2000’s didn’t have the data we have today (Bourne, 2003). During this period, managers were evaluating their employees in the best way possible, observation and social capital (Armstrong, 2000). Research reveals that evaluating performance is a hard skill to learn and is likely not a skill the average manager has in their toolbelt (Armstrong, 2022). Therefore, the use of observation and self-report alone is not sufficient in providing an accurate measurement of performance. Regardless, executives utilized performance management data to engage their investors and show them causes for financial results (Armstrong; 2000; Bourne, 2003).

Now, there are most likely multiple stakeholders whose opinions and experience matter to the organization (Bourne, 2003). The shift in stakeholders has changed the way organizations strategize and, ultimately, set and achieve their goals (Bourne, 2003). However, with more stakeholders comes a need for an enhanced performance management process that includes more facets of the organization (Bourne, 2003). In sum, performance management in the digital age is more complicated than when familiar performance management frameworks were designed (Armstrong, 2000; Bourne, 2003).

With enhancements, comes obscurity as more information is added to the system. Simplification of the process is a goal for many organizations however, it is a double-edged sword (Ferreira & Otley, 2009). When the process is too simple, findings often contradict one another and create more nuance (Ferreira & Otley, 2009). Therefore, it is suggested that organizations try to attain the most holistic view possible through a robust, yet tailored, performance management system (Ferreira & Otley, 2009). Therefore, Otley (1999) created their own framework centered around five issues depicted as questions (See Figure 3).

Fig 3: Otley’s five questions. (Otley, 1999, p.365-366)

Otley (1999) argues that the five questions given are not new but an organized way to perceive the MCSs as a Performance Management Framework. His framework also takes into account the main premise of past systems, budgeting (Otley, 1999). Through Economic Value Added (EVA), we see the age-old target of performance management being met, financial stakeholder engagement. EVA can be defined as “an overall measure of financial performance that is intended to focus managers’ on the delivery of shareholder value” (Otley, 1999, p.371). Overall, Otley’s (1999,p.374) framework is more of a “balanced scorecard” than those of the past (See Figure 4).

Fig 4: Otley’s scorecard. (Otley, 1999, p.374)

Shown in Figure 4, Otley’s (1999) scorecard centers ‘Vision and Strategy’; however, many organizational needs have evolved since then. Otley’s (1999) model really focuses on the output of the organization against the vision with only a 25% focus on the internal business. Later on, Andersen et al. (2006) devised a performance management framework intended to be more holistic and integrated within the organization (See Figure 5). Their idea was that performance management is a science (Andersen et al., 2006). In that, an organization’s performance and innovation is dependent upon the customer experience (Andersen et al. 2006). However, they missed a pivotal insight, it all culminates in a virtuous circle fueled by employees (Andersen et al. 2006; Conley, 2012).

Fig 5: Anderson et al.’s model (Anderson et al., 2006, p.71)

As shown in Figure 5, there is no value in the employee experience, it seems as though employees are simply a cog in a wheel (Anderson et al., 2006). Furthermore, the market segmentation goes straight to relationship building with the customer without the impact of the employee (Anderson et al., 2006, p.71). Buckingham & Goodall (2015) noticed this as a limitation. Most frameworks at the time did not encourage employee engagement nor focus on the employee experience (Buckingham & Goodall, 2015). With an emphasis on performance within most organizations, Gruman & Saks (2010) decided to couple the process with a promotion of employee engagement. Gruman & Saks’ (2010) model had a clear “focus on employee engagement” (p. 124). They believed increasing engagement “may foster performance improvement beyond that achievable when focusing on performance alone” (Gruman & Saks, 2010, p.124)” Overall, taking into account the employee’s goals, values, and interests as well as developing them into supportive colleagues is likely beneficial to the organization (Gruman & Saks, 2010). While their model centers around employee engagement, there was no research at the time to back this theory (Gruman & Saks, 2010) (See Figure 6).

Fig 6: Gruman & Saks’ Engagement Management Model. (Gruman & Saks, 2010, p. 128)

Additionally, Gruman & Saks’ Engagement Management Model (2010) is a bit far fetched from the employee experience perspective in 2022 (Marrelli, 2011). The model suggests that “Performance and Engagement | Appraisal and Feedback'' only influences “Employee Engagement,” and other steps by proxy, which is only half true (Marrelli, 2011). In summary, for this model to be accurately aligned to employee engagement reseach, all of the segments must show influence to “Employee Engagement” and vice versa (Marrelli, 2011). Additionally, research suggests that the way the performance appraisal is performed is actually more important than the results of the performance appraisal in terms of employee engagement (Marrelli, 2011). Therefore, it begs the question as to if the Gruman & Saks’ (2010) model has foundational application (Marrelli, 2011).

Over time, new research on performance management has surfaced. Armstrong (2022) newest book covers the need for two-way dialogue between the evaluator and employee. Ultimately, they found that continuous feedback is necessary for accurate and adequate performance management (Armstrong, 2022; Bourne, 2003). Bourne (2003) also argues that organizations need to have internal dialogue and discussions that challenge the current state and encourage innovation. Besides continuous feedback principles, there are a multitude of changes to performance management practices that have been implemented over time but, on average, they resemble a standard skills assessment (Buckingham & Goodall, 2015).

Assessment of skills has always been a challenge for employees; however, it is also a huge cost to the organization (Armstrong, 2000; Buckingham & Goodall, 2015). Buckingham & Goodall (2015) found that skill assessment is inconsistent, no matter how objective the evaluators try to be due to their individualized perceptions. I.e. People are human and their experiences shape their perception, no two humans have the same exact experiences and therefore, all perceptions are inherently different. In sum, they found that performance ratings moreso measure the perception of the evaluator, not the employee’s actual performance (Buckingham & Goodall, 2015).

To alleviate this, research recommends asking evaluators to rank their own feelings and actions that they will take with their employee as opposed to rating the employee’s performance (Buckingham & Goodall, 2015). For example, asking the evaluator, “based on your perception and current position, if you were in charge of the budget, what percentage would you allocate to Person A?” as opposed to the traditional view of performance management, “how is Person A performing in their role?” They also suggest that utilizing specific questions like this at the end of every project also encourages continuous feedback (Buckingham & Goodall, 2015).

While we can definitely see the connection between performance management and standardized testing, neither has changed much since the early 1900’s (Himelfarb, 2019; Armstrong, 2021). Ultimately, the research is clear, performance management as we know it needs a facelift. The continuous focus on the bottom line over employee well being is detrimental to organizational success (Buckingham & Goodall, 2015; Conley, 2012). Specifically, it limits the potential of the organization (Buckingham & Goodall, 2015; Conley, 2012). Therefore, executives and organizational leaders should keep the virtuous circle of employee engagement in mind (See Figure 7).

Fig 7: Conley’s virtuous circle. (Conley, 2012)

As you can see in Figure 7, employee engagement is a virtuous circle that gives back to the organization tenfold (Conley, 2012). Investing in employee engagement can not only support the effectiveness of the organization but also its growth and development over time (Conley, 2012). When I apply this information to the development of performance management at my new organization, I would like to incorporate this into our framework.

Additionally, the calibration process - while inherently good, can be extremely cumbersome for all involved (Grabner et al., 2020). With that, there may be a way to reduce the lift for employees and executives as well as increase the data flow within the organization through monitored feedback (Buckingham & Goodall, 2015). Personally, I would like to dive into predictive modeling and continuous feedback to see how that could positively affect the organization and the load on the manager / employee when conducting performance appraisals. Overall, when I choose to revamp this system all insights gleaned from this research will be at play.

To go further into how this literature review has informed my perspective, as a Learning & Organizational Development Practitioner, I plan to integrate this information wholly into the development of a new performance management framework. My plan is to shift the narrative entirely. I work for a start-up and they don’t have 5, 10, or 20 year goals to achieve because we are still in the experimental phase. Therefore, I’d like to take advantage of this and what I’ve learned in this class to create a performance management framework that centers on the employee’s development. In sum, this literature review has really shaped my perspective and encouraged me to develop a framework that is more agile, employee-centered, and less taxing on the administrative side. In my evaluation plan (Work 2) I’ll go further into detail and explore how this proposed program can be evaluated effectively through continuous improvement.

*Andersen, Henriksen, B., & Aarseth, W. (2006). Holistic performance management: an integrated framework. International Journal of Productivity and Performance Management., 55(1), 61–78. https://doi.org/10.1108/17410400610635507

*Armstrong, M., & Baron, A. (2000). Performance management. Human resource management, 69.

*Armstrong, M. (2022). Armstrong's Handbook of Performance Management: An Evidence-based Guide to Performance Leadership. Kogan Page Publishers.

*Bourne, M., Franco, M., & Wilkes, J. (2003). Corporate performance management. Measuring business excellence, 7(3), 15-21.

*Buckingham, M., & Goodall, A. (2015). Reinventing performance management. Harvard Business Review, 93(4), 40-50.

Conley, C. (2012). Emotional equations: Simple truths for creating happiness+ success. Simon and Schuster.

*De Champlain, A. F. (2010). A primer on classical test theory and item response theory for assessments in medical education. Medical education, 44(1), 109-117.

*Ferreira, A., & Otley, D. (2009). The design and use of performance management systems: An extended framework for analysis. Management accounting research, 20(4), 263-282.

*Grabner, I., Künneke, J., & Moers, F. (2020). How calibration committees can mitigate performance evaluation bias: An analysis of implicit incentives. The Accounting Review, 95(6), 213-233.

*Gruman, J. A., & Saks, A. M. (2011). Performance management and employee engagement. Human resource management review, 21(2), 123-136.

*Himelfarb, I. (2019). A primer on standardized testing: History, measurement, classical test theory, item response theory, and equating. Journal of Chiropractic Education, 33(2), 151-163.

Howard, D. (2022). Why Did Labor Force Participation Rate Dip When the Economy Was Good?. Retrieved June 20, 2022, from https://www.census.gov/library/stories/2021/06/why-did-labor-force-participation-rate-decline-when-economy-was-good.html

*Marrelli, A. F. (2011). Employee engagement and performance management in the federal sector. Performance Improvement, 50(5), 5-13.

*Otley, D. (1999). Performance management: a framework for management control systems research. Management accounting research, 10(4), 363-382.

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*Prowse, P., & Prowse, J. (2009). The dilemma of performance appraisal. Measuring business excellence.

SAP Human Resources. (2018). Calibration Process for Employee Assessments | SAP Help Portal. Retrieved June 2022, from https://help.sap.com/docs/SAP_S4HANA_ON-PREMISE/c6c3ffd90792427a9fee1a19df5b092 /353648a8be3744c8a1b8064d1a3f809d.html?version=1709%20001