MOTIVATIONAL EFFECT OF PERFORMANCE MANAGEMENT: DOES LEADERSHIP MATTER?

• Author: Lee, Hyung-Woo
• Position: Survey

1. Introduction

   Public administration scholars have not paid sufficient attention to the topic of leadership until recently. The relative dearth of studies focusing on leadership in the public sector (Van Wart, 2003) reflects the unique disciplinary tradition of the field. It is a classical tenet of public administration that the legitimacy of large public bureaucracies is sustained only when its members strictly adhere to legislative directives, bureaucratic procedures, and executive controls. This unique context of public organizations often culminates in greater formal and procedural constraints which hinder public manager's discretion necessary for exerting a strong leadership (Wilson, 1989; Perry and Rainey, 1988). Since this rigid formal structure in public organizations may substitute for the function of organizational leadership (Ker and Jermier, 1978), both practitioners and scholars have been relatively less interested in the topic of leadership in public organizations.

   However, over the past few decades, we have witnessed a series of major paradigm shifts and administrative reforms that advocate for greater discretions of public managers and urge them to take on more active roles (Agranoff and McGuire, 2001; Kettl, 1997; Osborne and Gaebler, 1992). As a result, the agenda for public managers has become even more complex and comprehensive than ever before (Bryer, 2007). They are now expected to embrace an entrepreneurial spirit (Doig, 1990; Morris and Jones, 1999) and become central agents for organizational innovation (Borins, 2002; Parry and Proctor-Thomson, 2002) in order to achieve the missions and goals of public sector organizations better.

   Consistent with this new trend, studies on the effect of leadership in the public sector have proliferated over the last decade (Trottier, Van Wart and Wang 2008; Park and Rainey, 2008; Fernandez, Cho and Perry, 2010; Paarlberg and Lavigna, 2010; Oberfield, 2012; Wright and Pandey 2010; Moynihan, Pandey and Wright, 2012; Vigoda-Gadot and Beeri 2012; Wright, Moynihan and Pandey, 2012; Belle, 2014). The findings reported in these studies attest to the increasing importance of public sector leadership: leadership was found to influence diverse outcome variables, including public service motivation (Park and Rainey, 2008; Wright, Moynihan and Pandey, 2012), extrinsic motivation (Park and Rainey, 2008), follower satisfaction (Fernandez, 2008; Trottier, Van Wart and Wang, 2008), performance information use (Moynihan, Pandey and Wright, 2012), as well as performance at organizational (Fernandez, Cho and Perry, 2010) and individual level (Belle, 2014).

   Given that leadership affects such a variety of important outcomes of public sector organizations, one can easily extend such findings to argue that leadership effectiveness will be associated with the success and failure of performance management practice. Indeed, the importance of leadership in the era of new public management was highlighted by a number of scholars (Moynihan and Pandey, 2005; Moynihan, Pandey and Wright, 2012). However, with a very few exceptions (e.g., Gabris and Ihrke, 2000; Hennessey Jr., 1998), only a handful of studies attempted to provide either a cohesive theoretical articulation of why leadership determines the effectiveness of performance management or an empirical evidence for such argument. This study aims to fill that gap in the literature. Drawing mainly on the socio-psychological perspective of leadership, this study investigates the moderating effect of leadership on the association between performance management and worker motivation.

2. Public employee's perceptions of the reform toward performance management

   Despite the positive expectations based on the theory, many scholars have reported that the reform toward performance management has failed to achieve the motivational gains that it had promised (Bowman, 2010). This does not necessarily mean that the theory was inadequate. Rather, this is likely because of public employees' negative perceptions of the reform. Indeed, as Kellough, Nigro and Brewer (2010) stated, the reform encountered a furious resistance from the federal employee unions.

   There are several reasons why public employees reacted to the performance-oriented personnel management reform in negative manners. Firstly, people have a natural tendency to avoid being monitored or evaluated by others (Brickman and Bulman, 1977; Jones and Gerard, 1967). Unlike the popular rhetoric, the reform toward performance management began not as an incentive that compensates for high performers; rather, it stems from the growing distrust toward government and public officials (Bowman, 2010; Kellough, Nigro and Brewer, 2010). Thus, federal officials are likely to view it as a theory X control mechanism (Roberts, 2003).

   Secondly, the reform conflicts with other traditional bureaucratic requirements and management principles because it has spread out in the form of institutional isomorphism (Roy and Seguin, 2000) without thinking much about its implementation (Moynihan, 2008). For instance, as Radin (2000) noted, while increasing discretion is necessary for successful performance management, it is incompatible with the ethos of separated power of the U.S. government. Indeed, researchers have documented how the performance management reform resulted in the discrepancy between formal policies and informal practices (Moynihan, 2008). Such incompatibility may engender cynicism toward the reform (Wanous, Reichers and Austin, 2000; Chiaburu et al., 2013).

   Thirdly, the inherent goal ambiguity of public organizations makes it hard for employees to set a clear expectation of whether their efforts will pay off. It is difficult for many federal agencies to develop such objective performance indicators (Chun and Rainey, 2005). In the absence of objective indicators, performance evaluations are often based on arbitrary judgment or illegitimate criteria (Pearce and Perry, 1983). As a result, the execution of performance management only increases public employees' stress level (Choi and Whitford, 2017; Gabris and Ihrke, 2001), political behavior (Longenecker, Sims and Gioia, 1987) or gaming behavior (Van Thiel and Leeuw, 2002).

3. Bass's model of leadership

   Leadership is probably the single most salient factor affecting employees' perceptions in the workplaces. Hence, this study presumes that the leadership of public managers can make differences in motivational effects of performance management by reshaping the above-listed negative perceptions prevalent among public employees. Bass's model leadership (1985) contains some of the most frequently cited leadership styles: transactional and transformational leadership. Based on extensive research, Bass categorized leadership styles into three types, namely, laissez-faire, transactional, and transformational leadership such that combining them constitutes a 'full range' of leadership (Oberfield, 2012). According to Bass, laissez-faire is the least effective, transactional leadership is more effective than that, and transformational leadership is the most effective style that enables organizations to achieve 'performance beyond expectations'. However, transactional and transformational leadership work through distinctive mechanisms of influencing workers' attitudes and motivations, and hence, have their own advantages under certain conditions. Therefore, this study also postulates that transactional and transformational leadership enhance the motivational effects of performance management in distinct ways.

   3.1. Transactional leadership

   Transactional leadership is predicated on the proposition that leader-follower relationship is defined as an exchange relationship in which leaders provide rewards in exchange of followers' carrying out of good works. Today's scholars tend to view transactional leadership as less effective than the transformational one. This is because transactional leadership is considered to be a somewhat passive leadership style compared to the transformational counterpart. However, the behavior of rewarding those with achievement and sanctioning those with low performance can bear the consequence of providing clear signals or expectation regarding what roles and achievements are to be rewarded. Indeed, this consequences of transactional leadership are emphasized by numerous scholars (Bass, 1985; Jung and Avolio, 2000) and lead to follower's commitment, satisfaction and performance (Bycio, Hackett and Allen, 1995; Hunt and Schuler, 1976; Podsakoff et al., 1984).

   Transactional leadership can enhance the motivational effect of performance management because role clarity is greatly emphasized in the context of performance management in the public sector. As discussed previously, the lack of clear, unambiguous and objective performance indicators is one of the most frequently cited obstacles to successful performance management (Bonhet and Eaton, 2003; Murnane and Cohen, 1986; Kellough and Lu, 1993). In the absence of clear performance indicators, public employees will lose a sense of direction such and will face greater uncertainty as to what roles they have to perform to be recognized and rewarded. However, if managers perform the function of clarifying the roles and goals for their employees by exhibiting transactional leadership behaviors, then the negative effect of uncertainty will be mitigated and the leaders will be able to ensure the success of performance management.

   Hypothesis 1: The association between performance management and employee motivation will be stronger when their leaders exhibit transactional leadership behaviors. 3.2. Transformational leadership

   Transformational leadership can work as a moderator enhancing the motivational effect of executing performance management policies for several reasons that follow. Firstly, transformational leadership leads their subordinates to think positively about the practice...