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Evidence from research

Research projects and other analytical studies that 

deal with the impact of performance management 

on overall firm performance, or as aspects of indi-

vidual performance, are summarized below.

Latham and Locke

As  reported  by  Latham  and  Locke  (1979)  field  

research in a logging company involving 292 super-

visors  established  that  those  who  set  specific  pro-

duction  goals  achieved  the  highest  productivity. 

A  further  study  of  892  supervisors  produced  the 

same result.

Another  study  in  a  logging  company  involved 

setting a difficult but attainable target for loading 

trucks.  Loggers  were  told  that  they  would  receive 

no reward for achieving the target but that no one 

would  be  criticized  for  failing  to  do  so. After  the 

third month performance exceeded 90 per cent of 

the trucks’ capacity compared with 58–63 per cent 

previously.  This  level  has  been  sustained  for  the 

seven years to date.

An  analysis  of  10  field  studies  conducted  by 

various  researchers  for  a  range  of  jobs  showed 

that  the  percentage  change  in  performance  after 

goal setting ranged from 11 per cent to 27 per cent 

(median 16 per cent).

McDonald and Smith

Research was conducted by McDonald and Smith 

(1991) covering 437 publicly quoted US companies. 

The  findings  were  that  the  205  respondents  with 

performance management as opposed to the others 

without had:

 

●

higher profits, better cash flows, stronger stock 

market performance and higher stock value;

 

●

significant gains over three years in financial 

performance and productivity;

 

●

higher sales growth per employee;

 

●

lower real growth in number of employees.

The researchers commented that: ‘In the successful 

companies  the  difference  in  managing  employee 

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