Does enabling performance measurement system continually assist small firms in their everyday practices after its implementation?

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Amsterdam Business School

Does enabling performance measurement system continually

assist small firms in their everyday practices after its

implementation?

Name: Tang Wanrong Student number: 11088656

Thesis supervisor: Georgios Georgakopoulos Date: 19 June 2016

Word count: 13782

MSc Accountancy & Control, Specialization: Control

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Statement of Originality

This document is written by student Wanrong Tang who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract:

Developing an enabling performance measurement system can help SMEs to deal with several challenges, just like those large enterprises do; also it fosters learning, communicating, exchanging information among employees and employers during its developing phase. This paper focused on the influences that small firms have after the developing phase of enabling PMS and factors causing such influences. This research was based on interview data gathered from a small firm in China, with 9 interviews covered every department in the firm. The results showed that both the employees and the organization were benefited after the implementation of enabling PMS. To be specific, employee’s job performance and organizational overall performance were improved significantly. There are three reasons causing such effects: enabling PMS encourages employee participation thus increases employee’s willingness to put more effort into performance improvement; enabling PMS motivates employees to express values and beliefs hence increases employee initiative to be more involved into performance improvement; enabling PMS incentivizes the culture of high performance, therefore improve organizational overall performance.

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1. Introduction

1.1 Background information

Performance measurement system was described as a coercive supervisory tool to make sure that employee use provided resources to achieve organizational goals (Jo ̈nsson,1998). However, (Bisbe and Otley, 2004; Bititci et al, 2006; Wouters & Wilderom, 2008) discovered that apart from top-down supervision, receiving feedbacks from employees and implementing changes are more important in the fast developing business world. This function of performance measurement system was defined as enabling PMS, which enables employees at all levels to participate in the PMS aiming at achieving performance improvement (Wouters & Wilderom, 2008). Enabling PMS is used in many kinds of firms, including manufacturing and service industry (Radnor and Barnes, 2007). The benefits it brought to such large firms are significant: “it may compensate for the inherent incompleteness of performance measurement system; it includes experimentation and builds on professionalism of employees, which enhances both the validity and acceptance of the PMS; it fosters learning, communicating, exchanging information, which lead to improvement of performance.” (Wouters, 2009, P66). Research indicates that the effect of developing enabling PMS in large firms has been analyzed extensively (Hans and Jonas, 2015), whereas only a few researches (Groen et al., 2012, Garengo et al., 2005) showed that developing an enabling performance measurement system can also be useful to small and medium-sized firms (SMEs). Introducing enabling PMS helps such firms to deal with challenges that are common to small firms: “it boosts employees’ understanding about firm’s strategy; it leads to greater knowledge exchange among employees and it enables them to create new knowledge.” (Groen et al., 2012, P176).

However, still, there are not enough researches about the link between enabling PMS and small firms (Garengo et al., 2005, P25), thus, it is interesting to find out whether enabling PMS is continually benefiting SMEs in their everyday practices after the implementation. In another word, there is a gap between the implementation and its effect on those SMEs after the implementation (Groen et al., 2012, Garengo et al., 2005): whether this kind of PMS can consistently assist small firms or it may do harm to such firms.

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1.2 Research question

In this research, I addressed the gap mentioned above by analyzing interview evidence with the effect on a small firm that implemented enabling performance measurement system 3 years ago. Consequently, the main aim of this paper is to conduct more in-depth research to discover the influence of enabling PMS on small firms, and more importantly, the factors and reasons that result in such influences. As such, I want to collect views both from managers and employees to discover the influences they have been experienced after introducing enabling PMS: whether it benefits small firms or it is harmful to such firms. In addition, comparisons have to be made regarding with the difference between employee performance before and after the implementation of enabling PMS in order to find out the reasons causing such influences. Lastly, some interview questions will be designed to investigate on time effect on such influence: whether these influences caused by developing enabling PMS are continual effects or they just temporarily happened?

As such, the research question addressed in this paper is following:

Does enabling performance measurement system continually assist small firms in their everyday practices after its implementation?

As indicated before, there were few researches about the link between enabling PMS and small firms (Garengo et al., 2005, P25). In addition, research (Groen, 2012; Groen et al., 2012) had pointed out explicitly that a lack of research concerning with enabling PMS effect on small and medium-sized enterprises. My research can contribute to such area so that it can be used to help other small firms to make the best use of enabling performance measurement system.

1.3 Paper structure

This paper is structured as following:

Firstly, a literature review is presented in the next section, the theoretical lens of the evolvement of enabling PMS will be briefly introduced, which will be functioning as the basis for the remainder of the paper. Subsequently, the theory development of the paper will be presented based on the literature review. Next, the methodology of this

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study will be introduced in chapter three. Following the methodology part, descriptive analysis chapter will give a demonstration of the theory through an elaborate interview process. After that, discussion chapter will analyze the interview results and make conclusions according to the theory. Finally, a section concerning limitations and suggestions for future research will be displayed at the end.

1.4 Literature review

1.4.1 Performance measurement

Performance measurement system (PMS) is generally described as serving the needs of top managers (Jo ̈nsson,1998, Hall, 2010, Wouters and Wilderom, 2008) Through this definition, performance measurement was described as a coercive supervisory tool to make sure that employee use provided resources to achieve organizational goals (Jo ̈nsson,1998). This research enlightened another summary of a more specified definition of performance measurement, stated, “The framework of performance measurement and performance management evaluates the results of usage of management accounting and control systems.”(Otley, 1999, P363). This article has been used to help establish control practices that are applicable to the business contexts within following decade. Based on this theory, performance measurement system was specifically defined as a method used by top management to assist control systems within an organization.

However, following researchers (Anthony and Govindarajan, 2004; Bititci et al,. 2006; Wouters & Wilderom, 2008) started to explore other function of PMS apart from control tool. The concept of performance measurement was developed into a broader perspective, namely "the process by which managers influence other members of the organization to implement the organization's strategies" (Anthony and Govindarajan, 2004, p. 7). It stated that as time goes by, performance measurement in the modern business world should also include planning, coordinating, communication and evaluating information, decision making and influencing people to change their behavior in addition to the original purpose. With this newly discovered definition, the role of performance measurement was no longer restricted as the control function of corporate management but also contained processes such as coordination and communication, which means during performance measure process, managers not only provide one-way supervise, but also receive feedback from employees to make decisions. (Bisbe and Otley, 2004).

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However, researchers mentioned above (Jo ̈nsson,1998; Anthony and Govindarajan, 2004; Bititci et al,. 2006) only discovered that role of performance measurement has been changed to a broader level, which was not restricted as coercive control tool anymore, but they didn't specify what was the additional role exactly.

1.4.2 Role of performance measurement

With the inspiration of former theories (Jo ̈nsson,1998; Anthony and Govindarajan, 2004;), subsequent investigation (Bititci et al,. 2006) on this additional role has been implemented; Performance measurement should be integrated with a bunch of detailed characteristics list, among which “incentivize intelligent and logical performance based on  constraint control of management”(Bititci et al,. 2006, P24) has been proposed as an enabling function of performance measurement.

Based on (Adler and Borys, 1996), which discussed coercive and enabling formalization, the enabling function of performance measurement in a formalization is defined as enabling PMS(Bititci et al,. 2006). This finding highlighted following researches about such PMS (Ahrens and Chapman, 2004; Jordan and Messner, 2012; Mundy, 2010), "It is now becoming more common for lower levels employees to be actively involved, not only in the day-to-day operations that were once the domain of middle and senior managers but in activities that are of strategic significance" (Bartlomiej NITA, 2008, p. 7). In this article, it concluded 10 requirements that should be fulfilled by modern management systems, in which “taking into account the motivational aspects” has been listed at the end of the list, after “serving as a control tool”.

Taking into account the new role of performance measurement enlightened the specification of the change that hadn’t been discussed by (Anthony and Govindarajan, 2004), researches didn’t show much importance to this new role (Bititci at al,. 2006). As a result, further investigation should be made to figure out whether this enabling role of performance measurement is a worldwide change that needs management accounting to adapt, or it is just an assistant role to help the main control function of PMS (Bartlomiej NITA, 2008).

In 2008, Wouters and Wilderom implemented a case study to examine in detail about the importance of enabling role of performance measurement. It drew a conclusion as

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“The key objective was to have a PMS that was not only intended for top management of logistics control but one that employees at all levels would find helpful in their work and enable to achieve performance improvement.”(Wouters and Wilderom, 2008, p 488). In other words, it is very important for management accounting to accept the reality that As a result of fast developing business world, employees reckon PMS as enabling tool to assist primary simple controlling constraint used by top managers. Other researches had confirmed the importance of implementation of enabling PMS in an organization (Wouters, 2009; Wouters and Roijmans, 2011)

However, In order to establish a greater understanding of the researches accomplished in this field, it is critical for researchers to make explicit statements of the reasons that are considered necessary for the corporations to adjust to the change of PMS (Wouters, 2009).

1.4.3 Reasons of enabling PMS

In 2011, a field study carried by (Wouters and Roijmans, 2011) analyzed the reason of implementing enabling PMS. Based on this study, possible explanation was given in the paper as “PMS evolution engages all personnel whose performance is being measured, it may compensate for the inherent incompleteness of performance measurement system, it includes experimentation and builds on professionalism of employees, which enhances both the validity and acceptance of the PMS”(Wouters and Roijmans, 2011, P708). It stated the reason to adjust to the enabling role of PMS as compensation for difficulties in developing a technically flexible PMS that fully represents the need covers all the aspects of operational performance. In this case, enabling PMS fosters learning, communicating, exchanging information, Employees’ individual knowledge that can be used by management. Moreover, employees receive the good feedback through the adjusted new PMS. (Wouters and Roijmans, 2011). In accordance with the theory stated by (Wouters and Roijmans, 2011), a general answer to the reason of developing enabling PMS had emerged in the literatures, suggesting, “ an enabling PMS helps employees to confirm and form a mental model of the work they are performing” (Groen et al, 2012, P 234; Free, 2007; Jordan & Messner, 2012).

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“Cooperatively thinking up improvement ideas in the development of the enabling PMS taught employees to create knowledge. Moreover, several new performance measures stimulate employees to create knowledge because only when new knowledge is created, the set target can be reached”. Based on this theory, the involvement of employees in enabling PMS can be beneficial for them to gain strategic knowledge; enable them to learn from each other and most importantly, help them to implement these self-invented ideas into the dynamic business world ( Groen, 2012, Groen et al, 2012).

Through the articles above(Ahrens & Chapman, 2004, Jordan & Messner, 2012, Groen et al, 2012), discussions include “what” is the enabling performance measurement system, “when” did public discover and exploit this role and “why” enabling role helps employees. However, it is still unclear about “who” uses enabling PMS greatly and “how” this kind of PMS helps employees to improve their work Hans and Jonas, 2015).

1.4.4 Enabling PMS in different firms

Many kinds of firms have been widely using enabling performance measurement system. (Hans and Jonas, 2015). Traditionally, big manufacturing and service enterprises have extensively used it (Seong and Lewis, 2013). The authors found a strong link between the enabling performance measure and rewards in the big companies, incentivizing better performers climb the promotion ladder, which, in turn give them motivations to achieve much better perform. However, there were few types of research about the link between enabling PMS and small firms (Garengo et al., 2005, P25). Subsequently, researchers (Paola and Marco, 2010; Hudson, 2001) analyzed the suitability of enabling performance measurement systems in small and medium-sized enterprises and gave positive answers about the suitability. Unlike those big firms, small firms tend to have comparatively easy and flat organizational structures, a short-term, easy to reach mindset of employee’s perspective of how to accomplish future organizational goals (Brignall and Ballantine, 1996; Gronroos, 2007). The link underlying between enabling PMS and small firms was that “PMSs can support employees in their daily tasks so that key processes and their results become more transparent.” (Groen et al., 2012, P839).

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However, as it is indicated in the paper, it only looked at the flexibility to implement the enabling PMS, but not at the influence after its implementation (Groen et al., 2012). Also, as suggested by (Groen,2012; Garengo et al., 2005), more researches should by conducted in this area, especially topics about whether the enabling PMS can continually assist small firms in their everyday practices (and in dealing with the challenges) after its implementation ( Groen et al,. 2012, P859, Garengo et al., 2005). As such, for the next section, I will use theory to test the feasibility of this question.

2 Theory development

2.1 Formalization, enabling PMS

Formalization functions as an enabling tool for employees to better understand their daily jobs or for managers to constrain employees' contribution and compliance. There are two types of formalization. Coercive formalization exercise control functions on the basis of management knowledge. It limits individual autonomy and undermines employees' commitment and creates dissatisfaction. As a result, employees in coercive organization settings will not have too much motivation and innovation to devote into the complicated non-routine tasks. On the contrary, enabling formalization assumes that work can be fulfilled instead of a hopeless task; the organization can be treated as a cooperative enterprise, but not an arrogant dictator. (Adler and Bryan, 1996)

(Adler and Bryan, 1996) conceive a PMS as a form of formalization. Employee’ attitudes are more negative when PMS coerces employees’ effort while more positive when enabling PMS incentivize them to perform better job tasks.

2.2 Employee participation and performance improvement in

enabling PMS

Performance measurement participation can be defined as “how managers and employees work together to design and implement a new or modified PMS in open-minded organizations. The goal of using it is to make performance measures useful for the involved employees in their daily work thus provide positive effects to the

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organization.” (Abernethy and Bouwens, 2005, P217). Participation in enabling PMS requires employees having knowledge of the possible outcome of their performance (Hackman and Oldham, 1976), then it gives employees a certain amount of autonomy so that employees will perceive the development of the measures and their accomplishment of the performance as their own success or failure, therefore, they will reckon the measures as a reliable resource, which leads to acceptance of their output and improvement of their work. In conclusion, employee participation helps the employee to improve their work in enabling PMS environment because it increases attitude to take initiative to perform better. (Hackman and Oldham, 1976).

2.2.1 Employee initiative and employee participation

“Employee initiative is a work behavior defined as self-starting and proactive that overcomes barriers to achieving a goal.” (Frese and Fay, 2001b, P 345). Traditionally, the concept of employee initiative didn’t exist because the employee has often been reckoned as a person to be controlled by their performance and organizational rules (Birnberg et al., 2007. In this case, employee behavior is externally motivated since it aims at being supervised by money or promotion; once a task or organizational strategy is given, the procedure then goes to measuring the difference between a setting target and real performance; good performance always means that the employee achieved the goal setting in advance. Under this circumstance, employees act as outside receivers of coercive performance measurement (Staw and Boettger, 1990).

However, currently, employee behaviors are intrinsically motivated in a freely organization because the employee has the inherent interest in achieving the goals setting by themselves. In this case, the concept of personal initiative arises and it relates to putting effort into reaching self-determined tasks instead of pre-assigned ones given by the managers. Employees get actively involved in the performance measure process, to be self-starting, proactive, and persistent. As a result, showing initiative behavior is beneficial for both the individuals and the organizations since employees can deal actively with organizational and individual issues and challenges with motivated goals, plans, and feedback. Under this circumstance, employees act as inside participants of enabling performance measurement and this self-development

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contributes to improvement of individual performance and organizational success (Michael and Doris, 2001).

2.2.1.1 Employee attitude to take initiative

In job characteristic model (Hackman and Oldham, 1976), there are three aspects to influence employee attitude to take initiative. (1) Whether they experienced meaningfulness of the work? The meaningfulness of the work means whether employees are willing to show initiative depends on three states. Among all of three states, experienced meaningfulness of the work is the most important factor; it is triggered as long as PM participation reflects what employees really believe in deep in their heart, thus they don’t need to sacrifice their self-interest when performing daily tasks, which leads to more initiative willingness to put more effort in their job performance. (2) Whether they experienced responsibility for the outcome? Responsibility for the outcome means that experienced responsibility for the outcome of the work should also be taken into consideration. Because it allows certain autonomy and people are always consider success and failure as their own responsibility when they have autonomy so they show more initiative to make it work, as a result, they perceive the outcome to be more reliable and validated. (3) Whether they have knowledge of the results of the work activity? Knowledge of the results of the work activity is the knowledge of the results of the work activities. After feedback of performance measure, employee’s knowledge is increased to make more decisions. In this case, the measurement system has fewer errors and it fits better for the employees.

2.2.1.2 Social pressure to take initiative

Apart from attitude, social pressure also shows benefits to group participation because it gives employee motivation to justify their performance to their colleagues after they set the target by themselves. In this case, PMS can prioritize behavior and make it clear of what role he should play during his work. Actually, the effect of social pressure is more outstanding compared with self-developing PMS because employees will keep their motivation as they “promised” in front of their colleagues in advance. (Groen, 2012)

2.2.1.3 Capability to take initiative

In addition to attitude and social pressure, the capability to take initiative should also be taken into consideration through decision-facilitating role of PMS. People tend to make better decisions when they get proper feedback (Sprinkle, 2003) and able to

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perform better when they get accurate feedback from the measures (Van Veen-Dirks, 2009). Especially when they take initiative to participate in the performance measure, the result is often more accurate than pre-set goal by managers so that they have more ability to perform better. So it can be concluded that employee participation in developing their own PMS can increase their capability to take initiative.

2.3

Expression of values and beliefs

Participation in PMS can help employees to express values and beliefs to their top managers, which in turn benefits the design of PMS. A better expression of values and beliefs indicates organization’s better ability to facilitate the variety of emotions that can legitimately be displayed and felt in the organization. To be specific, Organizational employees could be given the power to negotiate and communicate collectively of the development of the PMS, they can ask questions, offer views and provide recommendations during the development and operation of the enabling PMS. As a result, they feel more responsible and comprehensive about PMS, which leads to better job satisfaction and improvement of performance. There are two ways of incentivizing expression: "playfulness" which means provides an easy atmosphere within the organization by jokes, laughter, and playful activities to encourage participation; "accessibility" which means provides a comfortable atmosphere with easy access to the content and feedback of existing PMS. (Chanhall et al., 2014)

2.4 Culture of high performance

In coercive PMS, employees are controlled by their supervisors with a pre-set goal and they only need to achieve this goal in a way that consists of the operational activities and daily routine. However, enabling PMS to encourage employees to participate in the PMS design and implementation; apart from their daily operational tasks, the most important duty of their job was to continually assist in completing the performance of the organization, which creates the culture of high performance. Due to the reason that different people have different psychological status, one concrete PMS cannot fulfill the need for all the staff so it is better to have two divided parts to keep the culture of high performance. It needs to incentivize every involver in the organization to think smarter, instead of simply work harder. To achieve this aim, PMS should conceptually separate the improvement system part and the operational

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system part; operational system acts like the mainstream of the driver while improvement system act like the tributary that will enable the improvement of the mainstream that is overall performance of the system. (Robson, 2005)

The organizational performance measurement systems have been used to provide managers with the relevant information about employee’s performance and overall company situation; the improvement performance measurement systems contributes to the alignment of organizational strategy and employee's interest because they support learning and communicating process more comprehensively compared with the operational PMSs (Ittner and Larcker, 2001; Speckbacher et al., 2003).

According to the theory mentioned above, I made a theory structure to demonstrate the relationship among all theories and it is presented as figure 1 below:

Figure 1

Theory structure

As shown above, according to all the theories mentioned above, improvement of employee attitude, social pressure and capability results in more willingness to be self-initiated to participate in PMS, which, accompanied by encouragement of expression of values and beliefs, as well as the culture of high performance, will lead to performance improvement.

In this case, I made the assumption that implementing enabling PMS can incentivize attitude, social pressure, capability, expression of values, the culture of high performance, therefore, achieve improvement of performance. In the next chapter, I will present what method I use to answer my research question.

2.1 Performance improvement in enabling PMS 2.2 employee

participation 2.2.1 employee initiative

2.2.1.1 attitude 2.2.1.2 social pressure 2.2.1.3 capability 2.3 expression of values and beliefs 2.4 culture of high perforamcne

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3. Methodology

3.1 Case introduction and interviewee formulation

I was a departmental manager of the firm that I want to do an interview in. I worked there for 3 years and I had 13 employees in my department. The firm is a small language training organization with 30 employees in total. It is quite a new organization that has been established only for 5 years but ranking in top 3 within the industry for last 3 years. The firm has a good reputation within the industry but actually, it puts little effort in doing marketing and advertising. What spreads the fame to their customers is their quality of the service, which, in this case, is the fact that 90% of the students who took part in their courses has improved their scores to their targets. So the fame has been passed from a group of students to other groups.

The secret of their overall good performance is their 40 precious lecturers. In fact, they do a great job of retaining these lecturers and the turnover rate is 0 for 3 years. Their employees are quite happy about the organization because the firm enables them to work with more motivation but not discipline them to work harder 1.

To be specific, firstly, the firm measures their performance by two parts: operational part, which is a number of lecture hours; improvement part, which is a scorecard with lots of criteria such as customer satisfaction, student’s score improvement, following feedback from student’s parents, etc. Employee’s overall performance is measured by the combination of these two parts: base salary, which equals hourly payment multiplies amount of hours; bonus, which is far more important than base salary, depends on the performance of the scorecard as nonfinancial measures. In this case, the firm motivates employees to “think smart” for how to improve their scorecard but not simply working harder. As the result, the employees are willing to give good

1_{In a}_{ccordance with theory 2.1: traditionally, PMS is used by top mang}_{ers to constrain and supervise the employees to finish} daily tasks, whereas this firm motivates employees in certain ways rather than control them, the description and analysis will be presented in chapter 4: descriptive analysis.

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quality lectures and most importantly, they are initiative to do follow-up work to ensure the improvements of students. 2

Secondly, the overall atmosphere is freely and motivating; employees sit with their managers together without traditional separated “manager office”, in this case, they are encouraging to talk about any issues with the managers. All the information is conveyed easily without obscure professional expressions, which motivates employees to express their value and beliefs3

Lastly, which significantly distinguish this firm with competitors in the industry, the firm enables employee in the design and implementation of the scorecard, for example, if the lecture is about IELTS test, then the employee can go and attend the test and show his score as the proof, the higher score he gets, the more payment he can get. 4

Since it is a small firm that the organizational structure is quite flat: one CEO, two departmental heads, one accountant, two marketing stuff, four sales person, and 40 lecturers, based on this simple structure, I made a figure show the organizational structure, as listed in figure 2:

2_{In accordance with theory 2.4: when organization divides PMS into operational and improvement}

components, employees can continually assist in improving the performance with his/her own performance indicators, thus creates the culture of high performance.

3_{According to theory 2.3: through “playfulness” and “accessible”, organization encourages employee to}

express their value and beliefs, which leads to open atmosphere to receive suggestions and feedback, therefore improve performance.

4_{Based on theory 2.2: participating in designing PMS leads to better acceptance of the result and more} willingness to put effort in performing better work.

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Figure 2

Organizational structure

As shown above, the structure is simple, a CEO with three departments: accounting, IELTS and TOEFL. For department of IELTS and TOEFL, each of the department has one marketing staff, two sales person and 10 lectures. For accounting department, there is only one accountant in charge of financial issues.

Interview had been selected as my method of gathering data, since it is reckoned to be the most appropriate means of researching management accounting issues (Edgley, Jones, & Solomon, 2010; Parker & Roffey, 1997), through the interview to get people’s opinion about this topic is an optimal way to capture the current trend about enabling PMS and its role in small firms. Accordingly, I conducted my interview in one a small language training organization in China as people working in this kind of business is more open-minded and willing to take initiative during their work, most importantly, people I interviewed have enough working experience in enabling management compared with traditional coercive management so their knowledge is more reliable and validated. In this case, I interviewed employees from all departments in the organization to ensure that I cover all aspects to reach the theoretical saturation.

Due to the reason that I had 3 years working experience in the organization as an insider, I can get fully access to interview staff from the whole organization. As a result, I conducted 8 individual interviews plus one joint interview with stuff from every department to make sure it is comprehensive and thorough enough through the whole organization rather than a specific case of one department. The employees that

CEO

Head of IELTS

1 marketing

stuff person2 sales 10 lecturers

Accountant Head of TOEFL

1 marketing

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I did individual interviews were: CEO (IA), accountant for accounting department (IB), one sales person (IC), two lecturers (ID and IE) and their supervisor (IF) of IELTS department, another two lecturers (IG and IH) from TOEFL department. In addition, the joint interview was conducted with two marketing stuff from two departments (II&IJ). The interview details including position, job description, working years are given in the table 1.

Table 1

Interviewee details

Interviewee Position Job

description Working years Date of interview Duration (mins) 1. IA CEO 5 May 19 75 2. IB Accountant 5 May 19 30 3. IC Sales 3 April 29 42

4. ID Lecturer IELTS 5 May 15 54

5. IE Lecturer IELTS 5 May 15 62

6. IF Manager 4 May 18 70

7. IG Lecturer TOEFL 5 May 3 65

8. IH Lecturer TOEFL 5 May 3 58

9. II & IJ Marketing 2&3 May 10 44

3.2 Process of data collecting

The interviews consisted of semi-structured open-ended questions. The open-ended questions were to make sure the interviewee will give their own view and perception about the regarded issue, and they were semi-structured to stop the interview for related issues and directions at the same time.

The interviews were conducted through Skype phone call in Chinese and everything was recorded and afterward written down into a transcript and translated into English, including the duration of each interview. To analyze these transcripts, all parts that were useful to come to the conclusions were labeled.

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At the beginning of the interviews, the interviewees were asked permission to record the interview. The individual interviewees were informed that the recording is just a way of showing the accuracy of the interview. More importantly, interviewees were assured of the confidentiality and that the transcript will be sent back to them for review. In this case, the accuracy of my data was ensured as well as the internal validity of my data.

During the interview, open questions were asked in the beginning such as personal details, including position, working period, satisfaction about the current position. This was followed by a general introduction of my research and interviewee’s personal knowledge and interest is asked. After the open question part, closed questions were asked about their participation and learning process in the PMS. This was followed by one open question about their attitude about their work and discussion about how the enabling PMS helps interviewees to improve their work. In addition, interviewee’s suggestions and recommendations about other influences that should be taken into account about the answers to my research question were concluded as well. In this case, all the possibilities were taken into consideration so that validation of the thesis was increased.

Finally, all the interviews were conducted in the Chinese native language so that I have translated the interview responses to English transcript as accurately as possible to increase the internal validity.

3.3 Data analysis

In this process, three sub-processes including data reduction, data display, and conclusion were used consecutively. (Huberman and Miles, 1994; Irvine and Gaffikin, 2006; O’Dwyer, 2004). By means of analyzing all transcripts and supplementary notes in detail, as well as listening to the record, a list of themes was selected from the data.

As suggested by (Strauss and Corbin, 1990), I started my descriptive analyses of the interviews by “open coding”, which gave each statement of the factors underlying the improvement of performance a label. Then I categorized the labels under “participation”, “expression of values and beliefs”, “culture of high performance”, “promotion”, “competition” and “money”. Subsequently, I selected and combined the responses into the factors listed in Table 2. In this case, I could assess if each

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interviewee had a response on each of those aspects, and if so, how significant it is by ranking the number of interviewees mentioning such aspect. 5(see Table 2). In addition, due to the character of semi-structure questions, one of the factors in table 2 had been extensively mentioning, additional assess the factors that influence interview response was conducted and made into another table (see Table 3).

Table 2

Main theme: the factors underlying the improvement of performance Interviewee Position I/P I/E I/C I/C I/P I/M

1. IA CEO 2 2 2 2 2 2. IB Accountant 3 3 3 3. IC Sales 4 4. ID Lecturer 5.6 5 5 5 5. IE Lecturer 6.7 6 6 7 6. IF Manager 8 8 8 8 8 7. IG Lecturer 9 9.10 9 9 8. IH Lecturer 10.11 11 11 9. II &IJ Marketing 12 10 Total 9 7 6 2 3 4 6

5_{According to the responses, factors mentioned by majority of the interviewees indicate that it needs to be}

analysed in more detail compared with the others (Huberman and Miles, 1994).

6_{Six factors (employee participation, expression of values and beliefs, culture of high performance,}

promotion, competition, money) are considered in the main theme, the reasons underlying the

improvement of performance. The columns beside the interviewee and position refer to the pages of the transcripts where the factor was identified (Miles and Huberman, 1994; Ryan and Bernard, 2003). The numbers in the ‘Total’ row represents the total interviewees who mentioned the specific factor under this category, which indicate the importance of such factor to the main theme. Code index: I/P: employee participation increased performance. I/E: express value and beliefs increased performance. I/C: culture of high performance was created to improve performance. I/C: competition to improve participation I/P: promotion leading to better performance. I/M: money incentivizes performance.

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Table 3

Theme: the factors underlying the improvement of performance in employee participation

Interviewee Position P/A P/S P/C

1. IA CEO 2 2 2 2. IB Accountant 3 3 3. IC Sales 4 4 4 4. ID Lecturer 5.6 5 5 5. IE Lecturer 6.7 6 6. IF Manager 8 8 8 7. IG Lecturer 9 9.10 8. IH Lecturer 10.11 11 9. II &IJ Marketing 12 12 Total 8 6 8 7

7_{Theme of employee participation, which had been mentioned by all the interviewees, needs additional}

opinions related with the factors underlying the improvement of performance in employee participation are considered, including “attitude”, “social pressure” and “capability”.

The columns next to the interviewee and position represent the pages of the transcripts where the factor was identified (Miles and Huberman, 1994; Ryan and Bernard, 2003).

Code index: P/A: attitude to take initiative improve participation. P/S: social pressure to take initiative improves participation. P/C: capability to take initiative improves participation.

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4. Descriptive analysis

In this section, I will provide a descriptive analysis of the transcript and record of my interview as well as the code explanation of my data. To be specific, I will demonstrate the theory theme with quotes from my interviewees and give a brief analysis and conclusion for each theme.

4.1 Effect of enabling PMS

As mentioned before, the firm I conducted my interview is a small language training organization that only has 5 years history in the industry, but it ranks in top 3 for last 3 years. However, as it was pointed by interviewee II and IJ about the marketing expense "the effort we have been put into marketing is very limited, it consists approximately 10% of the total net annual profits of the company, but our benchmark in the industry is usually 30% for the reason that this type of business just needs enough number of students signing up for the course, therefore you have more income which leads to better marketing campaigns, thus increase your fame in the business, and you expand the business… but in our case, our fame comes mostly from our quality of service rather that buzz market that our competitors always use."

In addition, also interviewee IA concluded as " Nearly 90% of our students who took part in out courses has improved their language skills not only shown by test scores but also daily communicational purposes. As a result, they passed this ‘free advertisement' to their classmates who are in needy as well, and they come and sign up for the same lectures as well. So as for us, our 40 lecturers are our core competency."

In fact, the organization indeed does well in the maintenance of their employees- the turnover rate of the 40 lecturers is 0 for 3 years. These employees are quite satisfied with the organization, as interviewee ID stressed the enabling function of the organization by stating that " I feel a lot of freedom working here, it's not a traditional business so that our performance is not measured in a traditional way… I can participate in designing how my performance is going to be measured by using my knowledge and skills… thus, the results of my performance measure are more reliable and validated, and I am willing to devote more into my performance." For this reason,

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it seems to be reasonable for the organization of retaining employees, as also emphasized by interviewee IC with the following quote:

The good aspect of working here is that I feel responsible for the results of my performance measure...Unlike other companies I know, which the top managers set a target in advance for us to achieve, regardless how ridiculous it is sometimes, here our boss notices the fact that he does know the overall strategy of the company but doesn't know the specific detail of what we are doing and how to set the short-term goals for us… so she gives us enough autonomy to decide which aspects should be measured, in this case, it is our duties to decide what goals should we achieve and we have to take responsibility for it… In another word, it feels like we are using our professionalism to help managers compensating for the area that they may not cover in the PMS to make it more validated and accepted.

Also, several interviewees (IB, ID, IE) recognized that this organization implements enabling PMS that gives employees not only freedom and autonomy but also creates a feeling of responsible for the results. On the other hand, this type of organization encourages employees to learn from each other, as it is mentioned by interviewee IE "we don't reckon our colleagues as competitors, because our boss doesn't provide us a single standard of what is a good performance, each staff has his own scorecard with his own criteria of performance quality… it can be used as a supplement in addition to standard PMS to judge our performance as long as it is reasonable. However, some of us will learn from the others to improve the scorecard of ourselves… At the end, the better measurement you have, the more bonus you get." The interviewee IA has also demonstrated this effect, with the statements as following:

I spend almost 2 years to learn the lesson; I am not a lecturer myself so I don't know how to give quality lectures and obviously I cannot give criteria to my employees to judge their performance. As a result, I introduced this enabling PMS into my organization thus it doesn't act as a control constraint but an enabling incentive; …on one hand, I only set the performance indicator which I can measure, for example, I pay the lecturers by hours they teach and it has nothing to do with the quality of their lectures, this part of performance is easy to get and if forms the base salary of every lecturer.... On the other hand, there is a scorecard for them to fill with their own performance indicator and it doesn't need to be the same with the others. For example,

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some employees set one indicator as test scores, which means that they did go to IELTS or TOEFL test in that month and they get full marks for the part they teach (reading, listening, writing, speaking), which shows their knowledge and ability to teach…. In this case, their hourly payment can be increased by 20%. Much to my surprise, others will learn from them to take part in the test because they reckon it as a good way to improve themselves as well as their salaries.

Additionally, one interviewee (IE) also mentioned "I have seen the learning atmosphere in my department, once one lecture achieved the goal that he newly designed, our CEO will raise his base salary according to how well he achieved the goal, leading to others designing the same thing and putting effort into it... Nowadays I can see people do more preparations for the lectures or the exams, aiming at giving better lectures or getting higher marks…but no one actually asks them to do so, they are just motivated."

In brief, the organization conducts enabling PMS to give employee job satisfaction and give CEO chances to retain those employees. On one hand, employees receive the freedom and autonomy to perform better because they feel responsible for the measure results of their performance; on the other hand, managers are willing to use these better results to incentivize the employees in return.

4.2 Reasons for performance improvement in enabling PMS

All of the employees in the organization mentioned above had recognized that the enabling PMS in the organization has improved their performance to greater or less extent. As such, in the following section, I would like to discuss the reasons for performance improvement in enabling PMS.

4.2.1 Employee participation

The motivation most frequently mentioned as the driving force to improve performance in such organization is employee participation, with all respondents addressing the same topic; employers and employees help each other to design and develop a new or modified PMS in open-minded organizations under the condition that employees have knowledge of the possible outcome of the tasks they do everyday so that managers can give autonomy to the employees. The benefit of such method is

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that employees perceive the measures as a reliable resource leading to acceptance of their output and improvement of their work. As it is pointed by interviewee IH, "I have suggested my boss about one indicator of our performance, which is our service quality, namely, the score improvement of the test that student take part in. For example, he got a 5.5 which was not a pass before he came here, after my lecture he gets a 6 or even higher which is a pass, then the service indicator in my scorecard can +1 so that I can get more bonus from this student. In this case, all I am thinking about is how to help him improve his scores within limited time but not work more to get paid more. My boss is quite happy about this, he gives me more incentive for work better, not work more. " Meanwhile, other interviewees (IH and IG) also indicated how employee participate can potentially lead to performance improvement:

Well, I have been working in this business for 10 years and I have participated in the exam for more than 20 times, I have enough knowledge to be taught and experience of how to teach…however, my former employer just pay us by hours we work so we have to work more to get paid more, however, we cant ensure the quality because of exhaustion, most importantly, no one cares about the results, everyone get the same amount of money in the end…here is different, hourly pay is the least important thing, I have been thinking how to give better quality lectures even after work, for me, show better scorecard at the end is my priority, thus not only my salary and bonus get increased, but also my reputation within the industry gets raised.

My boss and my colleague, we are a team, we work together, but not top-bottom control, and this leads to the perception that our achievement of the performance is our own success or failure and we accept it, we want to make improvements.

In conclusion, as most several interviewees had indicated that employee participation is a bottom-up approach that can actually improve their job performance due to the reason that it gives employee freedom and autonomy as well as a feeling of cooperating with the managers to overcome the incompleteness of performance measure system, it enables employees to use their own knowledge and professionalism to design their own performance indicators which in turn make sure the results are more reliable and validated.

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Subsequently, there are 7 out of 9 interviewees pointed out that expression of values and beliefs is also important when performing daily tasks. To be specific, employees in the organization have the power to communicate and negotiate of the development of the PMS, they are enabled to ask questions, offer views and provide suggestions during the development and operation of the enabling PMS. In this case, they comprehend PMS more clearly, accept the results of PMS easier, feel more satisfied with their job, and therefore their performance can be boosted. As interviewee IA stressed as following:

Our organization focuses on "equality" which means no concept of hierarchy exist to separate managers and employees, in another word, we don't use traditional top-down PMS… We welcome our employee's voice to be heard so that we cherish two words here: "playfulness" and "accessibility"… We work in an open space like Facebook or Google; there is no traditional separated "manager's office", everyone sits together to ensure that the atmosphere is freely and motivating… There is only one aim of doing this: employees are encouraged to talk about any issues with the managers under no condition… Meanwhile, all the information is conveyed easily without obscure professional expressions so that it provides a comfortable atmosphere with easy access to the content and feedback both for managers and employees…We cleared the obstacle created be hierarchy wish employee performance can be enhanced…most importantly, we want to communicate our operational strategy to our employees in a friendly way so that we can make sure our interest with employee' interest is maximum aligned.

Thereby, other interviewees (IB, ID, IE, ID, IF, IG, IH, II &IJ) recognized that expression of their values and beliefs indeed help them in their daily work due to the strategy mentioned above by the CEO of the organization, namely "enable freedom of expression". Firstly, staff may feel comfortable enough to be more open to providing suggestions with the sense of involvement. As it is indicated by interview ID "I have a kind of shy characteristic so that I don't know how my voice can be heard by the top managers before I came here, I don't know that I can be this creative, innovative and experimental. Our working environment is full of discussion, joking, and laughter…I feel like I am working with my friends, I can talk whatever I feel about the existing system to my colleagues or my boss in a narrative way, they will listen and give me

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feedback… I think my personal beliefs is consistent with my company." In addition, interviewee IG had mentioned another aspect about an expressive role in such organization: the "accessible" by the statement " I can not convey all my opinions with a formal performance measure system. Although it does help me to improve my work, it is not enough. I need to use more every-day language to express what I am thinking apart from my scorecard in PMS… for example, how our organization can be better improved, how my colleagues can work together about one specific student." In brief, expression of values and beliefs acts as a supplementary role to the improvement of performance apart from employee participation. The reason underlying is that formal PMS is not enough for employees to convey all their opinions and suggestions to the organization so that open and easily accessed atmosphere provides opportunities for the managers to know more about their employees and the organization, as well as for employees to learn corporate strategy.

4.2.3 Culture of high performance

Afterward, followed by employee participation and expression of values and beliefs, corporate culture had been addressed by most of the interviewees as well. Enabling PMS encourages employees to participate in the PMS design and implementation; to continually assist in boosting the performance of the organization, to think smarter instead of simply work harder, therefore, creates a culture of high performance. Interviewee IF has confirmed the concept by stating the following:

People tend to behave differently and think differently, therefore we want to build a high-performance culture that apart from daily routine tasks, part of employee responsibility is to affect or find ways to improve the performance of service in which they are involved, thus we divided our PMS into the improvement system and the operational system; operational system, which is, the quality of the lectures and improvement of student test score, acts like the mainstream of our organization while improvement system, which is the scorecard of each lecturer, acts like the tributary that will enable the improvement of the mainstream which is overall culture of high performance.

Thereby, several interviewees (IA, IB, ID, IE, ID, IF) noted that their performance had been increased because the overall culture helped them to do so. As an

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interviewee, IB had stressed " I have been working here for 5 years and I witnessed the change of corporate culture… At the beginning there was no such concept exist, all the employees work nearly 11 hours a day for all of their salary is based on hours they work, however most of them were nearly exhausted after 8 hours lectures not even mentioning 11 hours so they sacrificed the quality of their service in order to earn more money…For these three years, we have been implemented enabling performance measure system and our KPI is varied, people is not dying for overwork to get money but work smarter to earn the better amount of money, our culture is open, motivated and it correlates with an increase in performance."

The culture of high performance was also pointed by other interviewees (IB and ID) as " I can feel our organization is different, our culture is like a rising tide lifts all boats" and " I am unconsciously improving myself with all my colleagues, with my company." In addition, one interviewee (IF) had stressed, "Our PMS is divided into two parts; our working hours, student evaluation of the lecture and their score improvement as one part… Scorecard with your own indicators as another, including your score of the test you had taken part in or numbers of phones, calls you had communicated with student parents or a number of students you attracted… This type of culture incentivize me a lot, my payment has been increased a lot since I came here… Most importantly, my reputation in the industry is established."

To summarize, due to the reason that different people has different psychological status, one concrete PMS cannot fulfill the need for all the staff so it is better to have two divided parts to keep the culture of high performance according to psychological principles, thus there can be a predicted change in staff behavior that boosts performance substantially, without the use of other extrinsic rewards such as promotion and money, which, will be presented in the following section.

4.2.4 Extrinsic factors

However, several interviewees mentioned that despite intrinsic motivation such as participation, expression of values and culture of high performance, some extrinsic factors should also be taken into considerations; including competition, promotion and money.

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As for competition, it is acknowledged by the interviewee ID " We have 10 lectures in my department, all of them are very experienced professionals and sometimes it makes me feel nervous because I am kind of perfectionist that always wanted to be the best in my area… It has nothing to do with the payment but individual prestige: you can have a sense of achievement only if you step on the peak of a mountain. That's the reason why I work so hard to perform better and better." As such, interview IH also stressed, " We have to admit at some point that competition makes us perform the greater job. If one student gives better comments to my colleague than to me, I would think back to see which part I can improve… so I think competition gives me the motivation to perform greater job… However, I don't feel the intrinsic motivation to do so."

As such, it was indicated above that competition could also be one reason that improves employee performance in this organization. Meanwhile, some interviewees expressed that besides the competition, the promotion also counts. As interviewee ID mentioned as following " In my case, I want to be a manager in the future, so that I have to perform better in my daily tasks, at least better than most of my colleagues, it's the external reason that drives me." Also, as pronounced by interviewee IG, "My career path is trying to be a manager here then learn the way to operate such organization like this. Someday in the future, I want to establish the same organization by myself. In this case, I have to do the greater job here in case that I can get a promotion which acts as extrinsic motivation for me."

In addition, as other 4 interviewees (IE; IF; IG; II&IJ) had indicated, apart from competition and promotion, money is one reason to improve their work as well. As it is pointed by interviewee IE, " who doesn't want to earn more money... Here it is easier; you have different measures as chances to increase your base salary as well as a bonus only if your performance is improved." Besides, interviewee IB also stressed that not only lecturers but also sales and marketing staff hold the same opinion: if they get paid more, they are willing to work harder, therefore, their performance is improved, which in turn incentivize managers to give them more bonus, it's a good loop that benefits both individuals and organization.

In brief, even if some interviewees claimed external incentive such as competition, promotion and money are a good way to improve employee performance, the majority

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of interviewees still reckon employee participation as the most important factor that drives a boost in performance. In other words, employee participation act as an intrinsic factor works better with regard to improvement of performance.4.3 Factors improve employee participation

4.3 Factors improve employee participation

As it was mentioned before, all of the samples in the interview have chosen employee participation as the most important factor that boosts employee performance. Due to the fact that everyone thinks it should be stressed in such organization, the topic regarding with reasons that increase employee participation has been further discussed in this section.

All the responses concern with reasons that enhance employee participation was divided into three categories: attitude, social pressure and capability to take the initiative.

4.3.1 Employee attitude to take initiative

As for attitude, which indicates the willingness to show initiative in the PMS participation; the more willingness to be initiated, employees can show more participation behavior, which leads to performance improvement. Responses including experienced meaningfulness of the work, experienced responsibility for the outcome of the work and knowledge of the results of the work.

With regard of the experienced meaningfulness of the work, several interviewees (IG, IH, II&IJ) pointed that they don’t sacrifice their personal interest when performing tasks as long as PMS participation reflects what they really believe; therefore they know and accept PMS as well as show more initiative to participate in design of PMS, thus improve their performance. It is demonstrated by interviewee IF as following:

It is almost impossible for the employees to be self-started or persistent for their daily work if they do not fell positive about taking initiative, not even mentioning PMS participation… since we are a small organization and the structure is relatively flat… we have an open atmosphere that we encourage our employees to utter their voice so that we know what they really want and how to implement changes for them to feel

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positive about taking initiative. As a result, they can experience the meaningfulness of the work thus improve their PMS participation and finally enhance their performance.

Meanwhile, as for experienced responsibility for the outcome of the work, some interviewees mentioned that they feel a sense of positive involvement when putting effort into PMS participation under the condition that they are given a certain amount of autonomy, they want to make it work and feel responsible for the results so that they make improvement of their performance initiative. As it is pointed by interviewee IC as following:

When I was given autonomy to design my own PMS, actually I feel that is my own thing, my own success or failure, and I was ready to accept whatever the result is because I made it work and It is more reliable compared with PMS that someone else set for me… This, in turn, increases my motivation to put the effort in PMS participation and I am intrinsically driven to perform better.

Lastly, when it comes to knowledge of the result of the work, 8 interviewees stressed that participation in PMS provide feedback, which increases the accuracy in decision-making process thus the better results give employees more incentive to participate in designing PMS and increase job performance at the end. Interviewee IG offered his opinion as following:

The PMS, which I designed, has less error because I have knowledge of what need to be measured and how to measure it, thus the result is more validated and the feedback is more accurate… for example, student score improvement cannot only be judged by one test because the sample is not enough, it should also include the mock tests that we did during the course, from all the feedback I can know which part I need to improve regarding this specific student.

In brief, apart from interviewee IB, other interviewees pointed that due to the fact that employee can experience meaningfulness of the work, responsibility for the outcome and knowledge of the results, employee attitude to take initiative can be increased to some extent, thus leading to more willingness to participate in performance measure system then increase their job performance.

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As for social pressure, which indicates benefits to employee participation because it gives employee motivations to justify their performance to their colleagues after they set the target by themselves; the more social pressure is experienced, employees can show more participation behavior, which leads to performance improvement. As it is emphasized by interviewee IA:

After my employee set the targets by themselves, they devote more into their jobs because the results show how much effort they had put into it… most importantly, they are more willing to demonstrate their efforts so that they show initiative to work… Actually, this factor is long lasting compared with self-started motivation such as attitude, it is extrinsically incentivized.

As such, more interviewees (IB, IC, ID) had pointed, “My PMS is my ‘promise’ to my colleagues and my boss, I don’t want them to underestimate me so I have to do a better job to achieve my ‘promise’ to justify myself to them.” In addition, interviewee IC, a sales staff offered the same opinion, “ I have observed their efforts, some of the lecturers go to the exam every month just for a high score, which represents their knowledge about the exam, as well as an equivalency to their colleague… who doesn’t want to be the top in this industry? If you want to be the top, you have to have a full marks in those exams as you promised before.”

In conclusion, the effect of social pressure, which acts as an extrinsic motivation, is more outstanding compared with self-developing PMS because employees will keep their initiative as they “promised” in front of their colleagues and customers in advance.

4.3.3 Capability to take initiative

As for capability to take initiative, which means the ability to perform better when they get accurate feedback from the results then make more precise decisions; the more feedback is received, employees can show more accuracy decision-making behavior, which leads to initiation in PMS participation hence improve performance. As it is mentioned by interviewee ID:

When I show my initiative to take part in performance measures, the result is more accurate compared with what the managers set for me…I can use this feedback for

Does enabling performance measurement system continually assist small firms in their everyday practices after its implementation?

Amsterdam Business School