Effects of Performance Management – Advancing a Behavioural Model

Despite many empirical studies of performance management systems in the public sector, no consensus exists on their relative merits and ills, and studies have shown differing results. Recent literature has made some progress in understanding the moderating influences of organizational factors, but we still lack a theoretical model of how performance information affects organizational decision-making in the first place. Without a firm model in place comparative studies are destined to remain explorative and unfocused in terms of model specification. Seeking to remedy this state of affairs, this paper introduces a new theoretical model that integrates the study of performance management effects with the literature on bounded rationality in organizations. As a way of improving our causal understanding, the model proposes that contingent on measured performance dimensions and actor preferences, different kinds of managerial and employee attention shifts and changes in priorities and task perceptions will result. Furthermore, the model suggests that due to satisficing rather than maximizing behavior, attention shifts as well as organizational search, risk taking and change patterns will depend on measured performance relative to levels of aspiration, both within and between organizations. This allows for both individual and organizational level predictions that are hitherto untested. In an attempt to overcome general methodological challenges in the literature, the paper concludes with a novel economically and politically feasible field experimental research design for testing the model. By manipulating the supply of information, this allows us to disentangle the influences of performance information from the empirically very diverse designs of entire performance management systems.