Case in Point: Introducing the Performance Review System to Students

[The following post is re-blogged from SAGE Connection. Please click here to view the original article.]

In most companies, performance appraisals (PA) are a common practice used to evaluate overall employee performance while monitoring and fostering the success of both the employee and the company as a whole. This month’s installment of Case in Point, a blog series drawn from SAGE Business Cases and containing insights from thought leaders in business and management, explores a case study written by Dr. David Kimball that follows one human resource director’s journey to construct a valid PA and performance management system (PMS). The following is an interview with Dr. Kimball as he explains the benefits of teaching performance review systems to students in a classroom setting:

  1. The case you wrote describes the implementation of a performance appraisal system at a company that had never had one in place before. In your opinion, what are the top three takeaways from this case for those learning about implementing a performance review system for the first time?

The top takeaway is to consider performance appraisals from the ground up. The student is able to think of the true goals of the PA. What does the company really want to accomplish with the implementation of a PA process?

The second takeaway is for the student to consider what an employee can learn from the PA process. What areas of a job are reviewed in the performance review? In the case, students can assess the areas of work that are the human resource director’s strengths.  Where are  her weaknesses?

The third takeaway is for students to design and complete a PA Form. Students can either use the form in the case or practice designing their own form. Students can also complete the form for this particular director’s performance.

  1. What kind of information would you expect students to bring to this case study in order to accomplish the assignment?

Most students have not been in a management position where they administer a PA. So, the case allows the student to experience what this individual has to accomplish by creating and administering a performance appraisal system. The student in class is able to role play being the human resource director in a performance appraisal situation.

  1. How are problem-based case studies particularly helpful in teaching real-world management issues in the classroom?

Student engagement in class increases dramatically during case discussions.  This case is intentionally short to allow students to read the case in class, discuss it within teams during class, and present their findings in class. Students like to participate in Skill-Building cases that allow them to develop their own skills as managers.

Learn more by reading the full case study, Why Do We Conduct Performance Appraisals? Jennee LeBeau and the Case of the Missing Performance Appraisal System  from SAGE Business Cases, open to the public for a limited time. To learn more about SAGE Business Cases and to find out how to submit a case to the collection, please contact Rachel Taliaferro, Associate Editor: rachel.taliaferro@sagepub.com.

Read last month’s case in point, A For-Profit Model for Social Entrepreneurship.

Dr. David Kimball, co-author of Sport Management: Principles, Applications and Skills and  Entrepreneurial New Venture Skills

Family Firms and the Impact of Incentive Compensation

[We’re pleased to welcome authors James Chrisman of Mississippi State University, Srikant Devaraj of Ball State University, and Pankaj Patel of Villanova University. They recently published an article in Family Business Review entitled “The Impact of Incentive Compensation on Labor Productivity in Family and Nonfamily Firms.” From Chrisman, Devaraj, and Patel:]

 Family firms are thought to face a managerial capacity constraint owing to the preference of hFBR_72ppiRGB_powerpoint.jpgigh-ability job candidates from outside the family to seek employment with non-family firms, which usually offer higher compensation and more lucrative career opportunities. In our paper, we theorize that incentive compensation can ease this constraint by signaling the attractiveness of working in family firms, thereby increasing the average ability of a family firm’s workforce. We therefore hypothesize that incentive compensation will reduce the productivity gap between family firms and non-family firms.

We are interested in this topic because much of the focus in the literature on non-family employees in family firms deals with issues associated with alignment of interests after workers have been hired. Few studies deal with the pre-employment problem of adverse selection, which is primarily (but not entirely) an issue of worker ability rather than worker effort. We also wanted to emphasize that if job candidates seek employment with firms that are compatible with their self-interest, adverse selection can exist even in the absence of an opportunistic pursuit of self-interest (or in the presence of stewardship motives).

Bounded rationality and information asymmetry make judging the ability of potential employees difficult for the owner-managers of both family firms and non-family firms (and even for the potential employees themselves). However, when the labor pool available to family firms becomes attenuated because high-ability workers self-sort according to a preference to work in non-family firms, the adverse selection problem facing family owner-managers becomes even greater.

Incentive compensation will be more valuable for high-ability job candidates than it will for low-ability job candidates because the former are most likely to benefit from it. Thus, incentive compensation signals performance will be rewarded, which may help alleviate the adverse selection problem facing family firms. Our empirical analysis of a matched sample of over 200,000 small and medium-sized firms obtained from a U.S. Census survey supports our contentions. Findings indicate that the productivity of family firms that provide incentive compensation increases at a greater rate than the productivity of non-family firms that provide incentive compensation (compared, respectively, with family and non-family firms that do not offer incentive compensation).

We hope that our paper will inspire further work on the adverse selection problem facing family firms. We also hope that our paper will lead researchers to focus more on how bounded rationality and information asymmetry, rather than simply opportunism or the lack thereof, influences the behavior and performance of non-family employees in family versus non-family firms.  In this respect, we suggest that the presence of bounded rationality and information asymmetry make incentive compensation and monitoring valuable tools in family firms regardless of the composition or proclivities to behave opportunistically of the workforce.

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Do Reputation Rankings Influence the Perception of Firms?

9671129839_5dd00509e9_z[We’re pleased to welcome Michael Barnett of Rutgers University. Michael recently published an article in Business & Society with co-author Shovi Leih entitled “Sorry to (Not) Burst Your Bubble: The Influence of Reputation Rankings on Perceptions of Firms.”]

I became interested in the topic of how reputation rankings affect individual perceptions of firms when I noticed all the efforts that business schools put into their rankings and the effects that these rankings have on their stakeholders. Potential students, faculty, staff, and alumni can’t really tell what goes on across business schools on a day-to-day basis, and so they must rely on these reputation rankings for insights. Yet, the corporate reputation literature assumes that what one thinks of a particular organization is based on the actions of that organization — even though most of us most of the time have no clue. As a result, in many if not most schools, rankings now drive actions, perhaps more so than actions drive rankings.

Relative to corporations, what information do people rely on to form their views? Reputation rankings  from BAS CoverBusinessweek, the Financial Times, Fortune, US News & World Report, and other such sources have proliferated. Researchers have voiced concerns about reputation rankings; particularly the methodologies used to determine them. In this article, though, we are concerned not with the methods but with the influence of reputation rankings. How do people use rankings when forming their views of a firm? Do rankings affect or overshadow other information that one may have about a firm?

We isolate the effects of reputation rankings on individuals’ perceptions of a firm. Indeed, we find that perceptions are influenced by reputation rankings, particularly when these rankings are negative and congruent with other information about the firm. These findings suggest the need to develop a richer perspective on reputation. Corporate reputation has long been conceptualized as an aggregation of individual perceptions, but it also needs to be understood as a driver of individual perceptions. Greater focus on this latter aspect may help to explain loose linkages between a firm’s characteristics and its reputation. As a result of the influence of reputation rankings, a firm’s reputation may change even if its characteristics remain constant and, conversely, changes in a firm’s characteristics may be slow to produce change in its reputation. Additional insights into the information that individuals do and do not attend to in revising their perceptions of a firm can help better explain the connection between a firm’s behavior and its reputation and thus deepen understanding of how to effectively manage reputation.

The abstract for the article:

We measure the influence of reputation rankings on individuals’ perceptions of firms. Through experimental design, we vary whether and how participants are exposed to a reputation ranking alongside other information about a firm. We find that rankings influence perceptions when they are negative and congruent with other information about the firm. These findings help explain how a firm’s reputation can change even if its characteristics remain constant and why change in a firm’s characteristics can be slow to produce change in its reputation.

You can read “Sorry to (Not) Burst Your Bubble: The Influence of Reputation Rankings on Perceptions of Firms” from Business & Society free for the next two weeks by clicking here. Want to know all about the latest research from Business & SocietyClick here to sign up for e-alerts!

*Skyscraper image attributed to Mike H (CC)

Management Practices: Complementarity is the Key

[We’re pleased to welcome Arthur Grimes of Motu Economic and Policy Research and University 16296308759_8149d18c99_zof Auckland. Arthur recently published an article in ILR Review entitled “The ‘Suite’ Smell of Success: Personnel Practices and Firm Performance” with co-author Richard Fabling of Motu Economic and Policy Research.]

Throughout the world, we see firms in the same industry in the same country having very different productivity outcomes. We have long been fascinated in why this is the case, and whether management can do anything to place their firm in the top quartile of performers within their industry.

It turns out that management practices are key to firms’ productivity outcomes. But the key is not a simplistic application of performance pay or any other single management practice to the firm; a holistic approach is required. Recent analysis ILR_72ppiRGB_powerpointbased on longitudinal data for New Zealand firms across all sectors of the economy, shows that having in place a suite of complementary high-performance management practices can raise productivity by over 10% for firms that are in the top quartile of management practices. This is the case for firms in manufacturing, services and other sectors. The suite of management practices includes having processes for staff consultation, clear firm values, performance reviews coupled with performance pay, room for autonomous staff decision-making and staff training opportunities.  What this means for firms is that there are no ‘magic-bullet’ management practices that can be introduced quickly to transform most firms. Management need to introduce a comprehensive suite of management practices if they wish to raise their productivity to be in the top rung of firms.

The abstract from the paper:

The authors use a panel of more than 1,500 New Zealand firms, from a diverse range of industries, to examine how the adoption of human resource management (HRM) practices affects firm performance. The panel is based on managerial responses to mandatory surveys of management practices in 2001 and 2005 administered by the national statistical office, linked to objective longitudinal firm performance data. The authors find that, after controlling for time-invariant firm characteristics and changes in a wide range of business practices and firm developments, a suite of general HRM practices has a positive impact on firm labor and multifactor productivity. Conversely, these practices tend to have no effect on profitability, in part because the adoption of performance pay systems raises average wages in the firm.

You can read “The ‘Suite’ Smell of Success: Personnel Practices and Firm Performance” from ILR Review free for the next two weeks by clicking here. Want to know all about the latest research from ILR ReviewClick here to sign up for e-alerts!

*Meeting image credited to Ministerie van Buitenlandse Zaken (CC)

New Podcast: Nadine Kammerlander on How Shared Stories Impact Family Firm Innovation

In the latest podcast from Family Business Review, assistant editor Karen Vinton and author Nadien Kammerlander discuss the article, “The Impact of Shared Stories on Family Firm Innovation: A Multicase Study” published in the December 2015 issue of Family Business Review. Nadine FBR_v26n1_72ppiRGB_150pixWdiscusses the findings of the paper, including how shared stories that emphasize the family, as opposed to the founder, inspire more family firm innovation.

You can find the podcast on the Family Business Review website here, or click here to download the podcast. You can also read the article from Nadine and her co-authors, Cinzia Dessi, Miriam Bird, Michela Floris, and Alessandra Murru, by clicking here.

Want to hear more? Click here to browse more podcasts from Family Business Review and here to subscribe to the SAGE Management and Business podcast channel on iTunes. You can also sign up for e-alerts and get notifications of all the latest research from Family Business Review sent directly to your inbox!


Nadine Kammerlander

Nadine Kammerlander is an assistant professor of management at the University of St. Gallen, Switzerland. She received her PhD in management from the University of Bamberg, Germany, and holds a master’s degree in physics from the Technical University, Munich. Prior to joining academia, she worked as a senior consultant for an international consulting firm. She has published articles in leading journals (e.g., Academy of Management Review, Academy of Management Journal). Her research interests include innovation and entrepreneurship in family firms, governance, and succession.

karen_vinton1Karen L. Vinton, Ph.D., is assistant editor of FBR and a 1999 Barbara Hollander Award winner and Professor Emeritus of Business at the College of Business at Montana State University, where she founded the University’s Family Business Program. An FFI Fellow, she has served on its Board of Directors and chaired the Body of Knowledge committee.

Environmental Proactivity: An Economic Booster for Firms?

[We’re pleased to welcome Jesús Valero-Gil of University of Zaragoza. Professor O&E_Mar_2012_vol26_no1_Cover_Final.inddValero-Gil co-authored an article with Pilar River-Torres, Concepcion Garces-Ayerbe, and Sabina Scarpellini of University of Zaragoza in the September 2015 issue of Organization & Environment entitled “Pro-Environmental Change and Short- to Mid-Term Economic Performance: The Mediating Effect of Organisational Design Change” .]

 The relationship between environmental proactivity and financial results in firms has been widely studied, and different conclusions have been obtained. Both from a theoretical and an empirical perspective, numerous authors have come to different and opposite results. This phenomenon inspired a new work in the topic. Given this lack of consensus, the idea that the relationship between environmental and financial performance is not as obvious as it might seem arises. The complexity of the relationship between pro-environmental measures and performance, suggesting that there are certain moderating and mediating variables in this relationship.

The abstract:

The aim of this study is to contribute empirically to the understanding of the economic effects of pro-environmental change in firms. First, we analyse whether pro-environmental changes performed in different sections of firms’ value chain (products, processes and supply and distribution channels) generate positive economic returns in the short- to mid-term. Second, we analyse whether measures implemented by firms to improve environmental performance (pro-environmental change) have been complemented with changes in organisational design, and whether these changes help increase short- to mid-term economic performance. Through an analysis of a sample of 303 firms, we have collected empirical evidence that confirms that pro-environmental change improves short- to mid-term business performance both directly and indirectly, through the mediating effect of improvements in organisational design that often go hand in hand with these processes.

You can read “Pro-Environmental Change and Short- to Mid-Term Economic Performance: The Mediating Effect of Organisational Design Change” from Organization & Environment free for the next two weeks by clicking here. Want to know about all the latest research from Organization & Environment? Click here to sign up for e-alerts!

How Do Customers and Companies Benefit from Service Firm Transparency?

JSR Cover[We’re pleased to welcome Andreas B. Eisengerich, who collaborated with Omar Merlo, Seigyoung Auh, and Hae Eun Helen Chun on their paper “Service Firm Performance Transparency: How, When and Why Does It Pay Off?” from the May issue of Journal of Service Research.]

Calls for greater business transparency have become louder in recent years and transparency has risen to the top of the agenda of many organizations. Businesses in a wide range of industries have started to embrace transparency, as their managers swear by the benefits of providing accessible and objective information to customers. Yet, many firms remain wary of the benefits of transparency and are unsure about how to implement it. How does transparency impact customers’ relationships with a firm? Is being transparent worth the risk? In our research, we focus on one particular aspect of firm transparency, which we deem particularly important to customers and firms. We term it performance transparency, and it reflects the extent to which customers view the information provided by businesses about their service performance as accessible and objective. We find that performance transparency benefits both customers and the firm. Customers benefit because when service quality is difficult to evaluate prior to a purchase, transparency can enable customers to minimize uncertainty by “seeing through” the firm and its offerings. Companies benefit because in a context where it is increasingly more difficult to conceal negative information about a firm’s performance, transparency can actually be used as a source of competitive advantage that increases a customer’s purchase intention and reduces price sensitivity. Surprisingly, we also find that being transparent best impacts companies that tend perhaps to be the most afraid of transparency.

You can read “Service Firm Performance Transparency: How, When and Why Does It Pay Off?” from Journal of Service Research by clicking here. Want to know about all the latest news and research from Journal of Service Research? Just click here to sign up for e-alerts!


Yeyi Liu is an Assistant Professor at Leeds Business School. He holds a BSc in Industrial Engineering and MSc in Management Science and Engineering from Xi’an Jiaotong University, China. He also holds a PhD from Imperial College London. Prior to joining Leeds University Business School, he worked as research associate at Strathclyde University Business School.

Andreas Eisingerich

Andreas B. Eisingerich is an Associate Professor of marketing at Imperial College Business School, Imperial College London. He earned his PhD at the University of Cambridge and worked at the Center for Global Innovation at the University of Southern California, Marshall School of Business. He has published on customer-brand relationships, customer engagement, and service management in the Journal of Consumer Psychology, Journal of Marketing, Journal of Service Research, Journal of Business Research, Harvard Business Review, and MIT Sloan Management Review, among others.

Seigyoung Auh

Seigyoung Auh is an Associate Professor of global marketing at Thunderbird School of Global Management. He earned his MBA and PhD from The Ross Business School, University of Michigan. He is also a research fellow at the Center for Marketing and Public Policy Research, Villanova University. His research interests are in knowledge sharing in sales teams, effect of leadership on extra-role behavior of frontline service employees, and customer orientation diversity. He has published articles in various outlets, including Journal of Service Research, Journal of the Academy of Marketing Science, Journal of Consumer Psychology, International Journal of Research in Marketing, Journal of Retailing, Journal of Product Innovation Management, Marketing Letters, Journal of Personal Selling & Sales Management, Journal of Business Research, and Industrial Marketing Management, among others.

Omar Merlo

Omar Merlo is an Assistant Professor of marketing at Imperial College Business School, Imperial College London. He earned his PhD from University of Melbourne, Australia. As a consultant and executive educator, he works with numerous service organizations around the world. His main research interests are in strategic marketing, marketing’s role within the firm, firm orientations, and service management. His research has appeared in journals such as Journal of Service Research, Industrial Marketing Management, Marketing Letters, Journal of Business Research, European Journal of Marketing, MIT Sloan Management Review, and Marketing Theory, among others.

Hae Eun Helen Chun

Hae Eun Helen Chun is an Assistant Professor of marketing at Cornell School of Hotel Administration. Helen earned her PhD in business administration (marketing) from the Marshall School of Business at University of Southern California. Her research interests include consumer experience management in the service context, with a focus on the role of consumer emotions, anticipation, memory, and sensory marketing. Her research has appeared in journals such as Journal of Consumer Psychology, Sensory Marketing, and Foundations and Trends in Marketing, among others.