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EMERALD_IJOPM_IJOPM636734 1226..1259 Managing performance in quality management A two-level study of employee perceptions and workplace performance Lilian M. de Menezes Cass Business School, City, University of London, London, UK, and Ana B. Escrig Department of Business Administration and Marketing, Universitat Jaume I, Castellón de la Plana, Spain Abstract Purpose – The purpose of this paper is to address potential effects of the control element in quality management. First, behavioural theories on how elements of performance management can affect organisational performance are examined. Second, theoretical models on how perceptions of work conditions may impact well-being and performance are considered. Direct and indirect pathways from performance management to productivity/quality are inferred. Design/methodology/approach – Matched employee-workplace data from an economy-wide survey in Britain and two-level structural equation models are used to test the hypothesised associations. Findings – The use of practices in workplaces is inconsistent with a unified performance management approach. Distinct outcomes are expected from separate components in performance management and some may be contingent on workplace size. For example, within quality planning, strategy dissemination is positively associated with workplace productivity; targets are negatively associated with perceptions of job demands and positively correlated with job satisfaction, which in turn can increase workplace productivity. With respect to information and analysis: keeping and analysing records, or monitoring employee performance via appraisals that assess training needs, are positively associated with workplace productivity and quality. Originality/value – This paper illustrates how control in quality management can be effective. Although the merits of performance management are subject to ongoing debate, arguments in the literature have tended to focus on performance appraisal. Analyses of economy-wide data linking performance management practices, within quality management, to employee perceptions of work conditions, well-being and aggregate performance are rare. Keywords Performance, Performance management, Quality management, Quality, Productivity, Employee perceptions of work conditions Paper type Research paper 1. Introduction Although for over 30 years management scholars have been striving to understand performance differentials between organisations, there is some consensus that management practices explain a share of observed variations in performance (Bloom et al., 2016; Nisar et al., 2019). Bromiley and Rau (2014, 2016) argued that managers replicate practices or activities that are perceived to be successful and amenable to transfer between organisations. Unsurprisingly, across the globe, as organisations attempt to address performance gaps, business excellence models and improvement initiatives are implemented. Quality management practices are now part of the daily routine in most organisations. Yet, while some practices have been found to be directly associated with performance, others are thought to be mediated through employee-decision making and effort (Bender et al., 2018). In this context, how to efficiently manage performance remains a key question which has implications for management, employees and societies. International Journal of Operations & Production Management Vol. 39 No. 11, 2019 pp. 1226-1259 © Emerald Publishing Limited 0144-3577 DOI 10.1108/IJOPM-03-2019-0207 Received 15 March 2019 Revised 25 July 2019 23 September 2019 Accepted 13 October 2019 The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/0144-3577.htm 1226 IJOPM 39,11 From an operations management perspective, performance management translates the organisational strategy into the reality of work units and ultimately to the employee (Melnyk et al., 2004; Franco et al., 2012). Disseminating the organisational strategy, setting targets and monitoring are means to engage the workforce with strategic objectives and encourage problem-solving attitudes for learning and continuous improvement (e.g. Neely, 2005; Prajogo and McDermott, 2005; Franco et al., 2007; Bourne et al., 2013; Koufteros et al., 2014). Together, these practices are core to any improvement initiative and reflect two main stages in the quality management cycle: quality planning and information and analysis (Mellat-Parast et al., 2011; Laosirihongthong et al., 2013). Performance management systems are, therefore, required to support continuous improvement (DeNisi and Murphy, 2017) and, ideally, ensure that all subsystems in an organisation work optimally towards the desired goals (Biron et al., 2011). Several scholars have described how quality management underscores the use of a process-based performance management system. In particular, Linderman et al. (2003) explained the importance of setting and achieving targets in Six Sigma: set goals are means to motivate workforce participation in learning activities and to develop behaviours that lead to sustainable improvements. Nevertheless, as Soltani and Wilkinson (2018) observed, reviews of the extant literature on quality management and, specifically on managing performance in organisations, imply that the effects of performance management on individual workers and organisational performance are unknown. Mixed findings have been reported and, in fact, performance management remains the most controversial aspect of quality management. Performance management is broadly defined as a regular process of identifying, measuring and developing performance of the workforce in alignment with strategic objectives (Aguinis, 2013). This process-based approach has often been portrayed as a managerial style that seeks to maximise employee contribution via strict control and greater demands, which negatively affects well-being (Sprigg and Jackson, 2006; Soltani et al., 2008; Franco and Doherty, 2017). Statements that performance management practices can be counterproductive are not new, neither in management thinking nor within quality management. For a start, Deming (1986) argued against performance metrics and appraisals, in his view, these practices were even detrimental to continuous improvement. Later, several authors (e.g. Duncan and Van Matre, 1990; Linderman et al., 2006) counter argued that Deming’s conclusions were at odds with the evidence from research on motivation and signalling, which demonstrates the importance of setting goals for performance at different levels in organisations. Recent publications not only underline a renewed interest in performance management (e.g. Capelli and Tavis, 2016; Pichler et al., 2018), but also provide further insights into this debate, by highlighting limitations of the accumulated evidence on outcomes from performance management. Within human resource management (Tweedie et al., 2019) and psychology (DeNisi and Murphy, 2017), comprehensive literature reviews demonstrate that out of various practices underlying performance management, the focus has been on employee-performance appraisals. Accordingly, it is mostly the role and variations in the design of a single practice for employee performance that have been subject to scrutiny. Studies have tended to examine employee performance, rather than at higher levels, and much of what is known about potential effects of performance management practices follows from theories of individual-behaviour applied to a small number of organisations. Consequently, large empirical studies on how performance management practices may impact aggregate performance and different dimensions of employee well-being are needed (Soltani andWilkinson, 2018). Within operations management, it is also important to remind ourselves that management practices can affect perceptions of working conditions and employee attitudes, which can influence performance at the group-level (Ukko et al., 2007; 1227 Managing performance in quality management de Leeuw and van den Berg, 2011; Saunila et al., 2014). Considering that awareness of organisational objectives and key performance indicators can enable a better understanding of targets and prompt the desired responses from employees (Ketokivi and Castaner, 2004), it may not be surprising that performance management has also been linked to improvements in employee-job satisfaction (e.g. Opstrup and Pihl-Thingvad, 2018). This is important since, at various levels of analysis, job satisfaction has been positively associated with performance (Bryson et al., 2017). Given conflicting observations on the effects of performance management, there may be direct and indirect pathways to performance. The present study takes inspiration from research on how employees’ perceptions of management practices can affect employee well-being and/or organisational performance, and on how models that address interpretations of work conditions (e.g. Bakker and Demerouti, 2017) can be applied in a management context. Thus, considering that employees interpret management practices as work conditions and react to these perceptions, different pathways to performance in workplaces are hypothesised. The focus is on how performance management may lead to different reactions from employees and, ultimately, may impact aggregate performance. Two-level structural equation models are developed in order to empirically test direct and indirect links. Following the recent literature on outcomes of management practices (e.g. Wood and Ogbonnaya, 2018), the workplace level is taken as the higher unit of analysis. Since implementations of policies can vary between different sites within an organisation, the workplace level is appropriate to observe and measure management practices (Gerhart et al., 2000). The present study adds to the understanding of the management practices- performance nexus, and helps to clarify potential implications of the most controversial element in quality management, which is performance management. The next section describes the background and theoretical perspectives that lead to the hypotheses and conceptual model to be tested. The empirical study is reported in Section 3. Results are presented in Section 4 and implications are discussed in Section 5, thus leading to the conclusions. 2. Background and hypotheses 2.1 Performance management in quality management For decades, scholars and practitioners have attempted to identify success factors in quality management (e.g. Hietschold et al., 2014). Among key factors, quality planning (developing strategic objectives into action plans, setting targets to be achieved by the improvement effort and communicating strategic directions or priorities) and information and analysis (monitoring of performance against targets to ensure progress and to continually identify areas for improvement) are inherent to any improvement initiative. Unsurprisingly, they are reflected in the criteria for quality certifications and awards (e.g. EFQM Excellence Model, Malcolm Baldrige National Quality Award), and are implicit in definitions of performance management (e.g. Biron et al., 2011). Indeed, most empirical studies of quality management and performance have considered quality planning and information and analysis, while specifying sets of practices presumed to enable performance (e.g. Ebrahimi and Sadeghi, 2013; Laosirihongthong et al., 2013). According to Prajogo and McDermott (2005, p. 1115), quality planning and information and analysis “reflect well the beginning (planning) and ending (evaluation) phases of strategic management processes”. In summary, from a quality management perspective, performance management is about decision making based on facts, how objectives and action plans are developed and deployed, and how data are assessed to monitor progress and drive improvements (Mellat-Parast et al., 2011; Hietschold et al., 2014). Accordingly, Table I defines performance management in the context of this study. 1228 IJOPM 39,11 2.2 Pathways from performance management to performance Quality management relies on the expectation of learning, dissemination and replication of good practice. People want to know where they stand, and thus an organisation’s ability to disseminate its strategy and orchestrate its resources, as implied in quality planning, is fundamental in pursuit of better performance. Scholars (Koufteros et al., 2014; Pavlov et al., 2017) have argued that the Resource Orchestration Theory