“Good” and “Bad” Control in Public Administration: The Impact of Performance Evaluation Systems on Employees’ Trust in the Employer
| Published date | 01 September 2019 |
| Date | 01 September 2019 |
| Author | Antoinette Weibel,Nadine Meidert,Meike Wiemann |
| DOI | 10.1177/0091026018814560 |
| Subject Matter | Articles |
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Article
Public Personnel Management
2019, Vol. 48(3) 283 –308
“Good” and “Bad” Control
© The Author(s) 2018
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https://doi.org/10.1177/0091026018814560
DOI: 10.1177/0091026018814560
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The Impact of Performance
Evaluation Systems on
Employees’ Trust in the
Employer
Meike Wiemann1, Nadine Meidert2,
and Antoinette Weibel1
Abstract
In the course of the New Public Management reform movement, public administrations
have increasingly implemented output-oriented control schemes, including systems to
evaluate employees’ performance. However, contradictory evidence exists about how
such output control that fundamentally differs from traditional bureaucratic control
affects performance-relevant employee attitudes and behaviors. In this article, we
present evidence that performance evaluations have positive or negative consequences
depending on the specific design of the system. Analyzing survey data from 184
employees and 60 supervisors from the German municipal administration by structural
equation modeling, we find performance evaluations employed as Management by
Objectives (MbO) have a positive impact on trust in the employer and that those
designed as Systematic Performance Appraisal (SPA) affect trust negatively. Both
relationships are mediated by perceived cooperative climate. These findings advocate
employing performance evaluations that are participative, adaptive, learning-oriented,
and transparent and thus enable fair cooperation between organizational members.
Keywords
output control, performance evaluation systems, trust in the employer, cooperative
climate
1University of St. Gallen, Switzerland
2Zeppelin University, Friedrichshafen, Germany
Corresponding Author:
Meike Wiemann, University of St. Gallen, Müller-Friedberg-Strasse 6/8, 9000 St. Gallen, Switzerland.
Email: meike.wiemann@unisg.ch
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Public Personnel Management 48(3)
Introduction
New Public Management reforms have altered the face of public sector organizations.
This is perhaps best visible in all public personnel management matters, in which
newly designed human resource management (HRM) practices relying on formal per-
formance appraisal and output-oriented recognition systems have brought a new
dimension of performance accountability into public sector organizations (see, for
example, Bouckaert & Peters, 2002; Cardona, 2006; Rubin & Weinberg, 2016; Yang
& Kassekert, 2009). The shift from a rule-driven, process-controlled bureaucracy to an
outcome-based performance evaluation doctrine has been strongly inspired by stan-
dard economic theory. The basic premise of this approach is that goal setting and
associated pay are needed to create performance incentives, thus implying that manag-
ers should not be controlled like bureaucrats and less bureaucratic behavior is needed
to increase organizational effectiveness in public sector organizations (Fama & Jensen,
1983; Jensen & Murphy, 1990).
However, this paradigmatic shift from the classical Weberian bureaucracy to a rational-
choice-based economic system has been widely criticized (e.g., Arnaboldi, Lapsley, &
Steccolini, 2015; Bouckaert & Peters, 2002). One central concern of public management
scholars is that using a system that relies on the assumption that employees need to be incen-
tivized to perform properly might signal that employees are not being trusted (Bouckaert,
2012; Dunleavy & Hood, 1994; Van de Walle, 2011). Thus, by employing private-sector-
inspired performance evaluation regimes, public sector organizations risk being perceived
by their employees as breaking the psychological contract of mutual trust, which can finally
result in crowding out employees’ trust and work morale (Frey, 1993) and thereby leading
to diminished employee performance in the long run (Weibel et al., 2016).
Both positions, the positive view on output controls supported by New Public
Management scholars and the negative backlash it created, might be exaggerated, as
trust and performance system research suggests. Relatively recent findings have shown
that control systems do not per se have positive or negative effects on trust but that their
consequences always depend on their explicit design, that is, the practices applied. For
instance, empirical findings by Mayer and Davis (1999); Tremblay, Cloutier, Simard,
Chênevert, and Vandenberghe (2010); and Weibel et al. (2016) propose that the impact
of control on employees’ trust is conditioned by whether the specific practices used are
perceived as just, reliable, and supportive and enable transparent and fair cooperation
between organizational members. Our article is in line with this research. We argue that
output control per se does not diminish employees’ trust in the employer. The effect of
output control on trust is always dependent on the design of the performance evaluation
system applied, which leads to the first research question:
Research Question 1: How do different designs of performance evaluation sys-
tems affect employees’ trust in the employer?
Wiemann et al.
285
Furthermore, we explore how such differential effects can be explained. A growing body
of literature suggests that managerial control systems in public sector organizations may
provoke a work climate dominated by fear, competition, and distrust among employees and
hence result in a low cooperative spirit (e.g., Diefenbach, 2009; Hoggett, 1996). A low coop-
erative spirit is likely to dampen employees’ positive expectations of their employer and
thus might be an important culprit for the negative effect of certain control regimes on
employees’ trust in the employer. Hence, our second research question is as follows:
Research Question 2: Is the relationship between different designs of performance
evaluation systems and trust in the employer mediated by perceived cooperative
climate?
We approach our research questions based on the case of the German municipal
administration in which, in 2007, output-oriented control was implemented in the form
of two structurally distinct performance evaluation systems: (a) Management by
Objectives (MbO) and (b) Systematic Performance Appraisal (SPA). MbO is a rather
holistic approach that includes participatory goal setting, continuous monitoring, and
supervisor feedback. SPA, on the contrary, concentrates solely on ex post-performance
appraisal based on predefined performance criteria. Recent studies on stakeholder per-
ceptions of the two systems let us assume that they have different effects on the coop-
erative climate and employees’ trust in the organization. The SPA system is reportedly
perceived as predominantly unfair, non-transparent, and unreliable, whereas the MbO
system is considered more objective, just, and participative (see Meier, 2013; Müller
& Schmidt, 2013; Schmidt & Müller, 2014). Choosing this specific study context
enables us to compare the impact of two distinctive performance evaluation systems
on the perceived cooperative climate and employees’ trust in the employer within the
same setting, that is, all other factors being equal.
In answering our two research questions, we contribute to two different streams of
research—first, the public administration literature discussing the effects of New
Public Management–induced performance management and measurement systems on
work-related employee attitudes and behaviors, and second, the bureaucracy and
HRM literature concerned with the effects of managerial control design and, even
more specifically, the literature studying control–trust relationships.
Output Control in the Public Sector: The German Case
With the New Public Management reforms, public service organizations have increas-
ingly employed output-oriented performance measurement and management systems
in addition to or instead of traditional process control (Arnaboldi et al., 2015; Bouckaert
& Peters, 2002; Hoggett, 1996). The designs of these newly introduced output controls
vary over countries and specific application contexts (Cardona, 2006; Organisation for
Economic Co-Operation and Development [OECD], 2017). The German context is
interesting because Germany is near the OECD (2017) average regarding how strongly
both output controls and performance-related pay have been adopted in the system.
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Public Personnel Management 48(3)
Moreover, the German case allows us to study and compare two different performance
evaluation systems.
Specifically, in Germany, as result of a new bargaining agreement adopted in 2005,
pay-related wages and corresponding performance evaluation procedures started to be
part of public organizations’ control and compensation systems by 2007. Concretely,
output control has been employed in the form of two different performance evaluation
schemes: (a) Management by Objectives (so-called Zielvereinbarungen) and (b)
Systematic Performance Appraisal (so-called Systematische Leistungsbewertung).
German public authorities were given the option to implement either of these two
evaluation systems or both, but their adoption was not mandatory (Greiling, 2005).
The two systems distinctively vary in their designs. MbO consists of a voluntary oral
agreement between supervisors and single employees or groups of employees about
specific goals (Hock, Schäffer, & Schiefer, 2006). These goals are...
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