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Individual Performance Literature Review

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LITERATURE REVIEW
In this section, we will review studies based on psychology theory that examines the improvement in individual performance by using PMS. Furthermore, this study investigates PMS as it is linked with business strategy, or strategic PMS.
Cognitive mechanisms
Hall (2011) contended that PMS can enhance employee behaviour through cognitive mechanisms if PMS assigns clear goals and tasks to all individuals. According to the psychological literature, clear goals can have three effects: motivating people(Latham and Baldes, 1975), improving the superior-subordinate relationship (Carroll and Tosi, 1970) and enhancing productivity and performance even when the goals and targets are quite difficult (Adhikari, 2010; Latham and Baldes, …show more content…

120). Intrinsic motivations using PMS can be creating habit, making comfortable working environment, and enhancing healthy competitive atmosphere (Brown, Cron, and Slocum, 1998; Lau and Sholihin, 2005; van Veen-Dirks, 2010). The following section discusses the elements of intrinsic motivations using PMS.
Creating habit. Habits are repeated activities that are generated from past experiences such as the past location, preceding flow of actions and particular people (Wood and Neal, 2007). Moreover, Wood & Neal (2007) convey that habits can be created with regard to individual actions to encode the context of activities in their procedural memory. Aarts & Dijksterhuis (2000) suggested that habits are formed as the representation of goals-action links and implemented to stimulate goals-directed automaticity in routine activities. Similarly, Simons (1995) suggested that automatic and unthinking behaviour in individuals, which he defined as “mindlessness”, can be generated through habit, rules and accepted classification …show more content…

Supporting the expectancy theory, most studies found that individuals are heavily influenced by financial incentives to pursue goals. For example, Sholihin et.al (2010) found that employee performance and morale seem low because rewards, promotion and pay raises or other rewards are not appropriately linked to the appraisal systems. Similarly, Guo et al.’s (2012) study found that individuals have a higher motivation to achieve goals if PMS is linked to autonomous extrinsic motivation such as incentives and bonuses. Overall, if rewards systems are properly tied to the individual results, employees have greater motivation to increase their performance (Guo et al., 2012; Pearsall et al., 2010; Stone, Bryant, and Wier,

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