Performance Management and Trust in Supervisors: Yoon Jik Cho and Jung Wook Lee

421496
and LeeReview of Public Personnel Administration

ROP32310.1177/0734371X11421496Cho
Review of Public Personnel Administration
Performance Management 32(3) 236–259

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DOI: 10.1177/0734371X11421496
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Yoon Jik Cho1 and Jung Wook Lee1
Abstract
This article investigates the effect of performance management and explores one factor—
trust in one’s supervisor—as a critical facilitator of it. Although improving performance
is a prominent issue in public management and the term, performance management, is
in heavy use in the public sector, systematic investigations on the subject are relatively
rare. Defining performance management as a human resource management tool, this
research empirically tests the associations between performance management and two
outcomes: perceived work-unit performance and perceived agency performance. In
addition, it examines the role of trust as a facilitator of the successful implementation
of performance management. Using the Merit Principles Survey 2005, we test the ideas.
Ordered logit regression analyses confirm that performance management promotes
perceived performance of both work-unit and agency, and the leverages are further
increased under a high level of trust in supervisors.
Keywords
performance and performance appraisal, organizational behavior/development, employee
attitudes, behavior, and motivation, federal government HRM, new public management
Introduction
Improving performance has been a prominent topic of public management for decades,
and its importance has been further emphasized with the emergence of New Public
Management (NPM) as a dominant paradigm for public sector reform (Kelman, 2007;
Kettl, 2000; Pollitt & Bouckaert, 2000). Radin (2000, p. 168) even singles out
the demand for performance as the theme that best characterizes the public sector
in the late 20th century. As a “standard component” of NPM reform packages
1
Yonsei University, Seoul, South Korea
Corresponding Author:
Yoon Jik Cho, Assistant Professor, Department of Public Administration,Yonsei University
50 Yonsei-ro, Seodaemun-gu, Seoul, 120-749, South Korea
Email: yoonjikcho@yonsei.ac.kr
Downloaded from rop.sagepub.com at SIMON FRASER LIBRARY on May 30, 2015

Cho and Lee 237
(Peters, 2008, p. 195), performance management has obtained the attention of reform-
ers throughout the world (Talbot, 2005). Many modern democracies are currently
engaged in various forms of performance management (Lah & Perry, 2008;
Organisation for Economic Co-operation and Development [OECD], 2005; Perrin,
2006), and the United States is no exception (Moynihan, 2008; Radin, 2006).
Underlying various performance management arrangements is the fundamental
assumption that they will contribute to better performance. Performance budgeting,
for example, improves performance by enhancing the efficiency of resource alloca-
tion, whereas performance-based human resource management does so by motivating
people to work harder toward the achievement of organizational goals. This very
assumption has strongly influenced the adoption and implementation of performance
management by reformers at all levels of government (Behn, 2002; Forsythe, 2001),
yet its validity has rarely been subject to rigorous evaluation (Sanger, 2008). Is perfor-
mance management an effective performance enhancement tool? What are the external
and internal factors that affect the implementation of performance management?
Given the enormous time and resources devoted to performance management at all
levels of government, and the continuing interest in and commitment to this managerial
initiative, these questions warrant serious consideration. With few exceptions (e.g.,
Lee, Cho, & Kim, 2009; Yang & Hsieh, 2007), however, scant research addresses
these critical questions by analyzing data from large, representative samples. There is
a growing body of studies that examine the effectiveness of performance management
and the conditions for its successful implementation (e.g., Heinrich, 2007; Moynihan,
2008; Perry, Engbers, & Jun, 2009; Radin, 2006), but these are largely qualitative or
descriptive in nature, which makes it difficult to test the relative validity of competing
perspectives on performance management.
In an attempt to fill the gap between normative discussion and empirical evidence,
this research tests the effects of performance management and explores one condition
required for its successful implementation. Of the many types of performance manage
ment, this study focuses on performance management as a tool for human resource
management within organizations. Two outcomes of performance management are
investigated: perceived work-unit performance and perceived agency performance.
Achieving a high level of performance is an ultimate outcome that performance man-
agement pursues. We consider the factor in two different levels: work-unit and agency.1
Using perceived measures of performance is one obvious limitation of this research.
However, perceived measures are often employed in public management research and
some studies demonstrate that employee perception is substantially correlated with an
objective outcome (Boyd, Dess, & Raheed, 1993; Yang & Pandey, 2009).
The research explores the role of trust for the successful implementation of perfor-
mance management. Trust increases organizational performance by working as a
lubricant of various functions of organizations (Dirks & Ferrin, 2001; Kramer, 1999).
Accordingly, scholars call for more research for the indirect effect of trust as well as
its direct effect (Dirks & Ferrin, 2001). To this end, we test whether trust in supervisors,

238 Review of Public Personnel Administration 32(3)
who evaluate employee performance, conditions the effective implementation of per-

formance management.
This research therefore seeks to answer two questions:
Research Question 1: Are employees’ evaluations of performance management

in their organizations positively associated with better perceptions of work-
unit and agency performance?
Research Question 2: Does trust in supervisors strengthen the relationships
between performance management and perceived performances of work-unit
and agency?
Using the data of the 2005 Merit Principles Survey, we test these ideas by ordered
logit regression analyses.
Performance Management: Current

Trend, Definition, and Core Processes
In this section, we discuss several facets of performance management. We first explain
several performance initiatives in the United States under the NPM movement. Then,
the research defines the term performance management to be suitable for the current
research. The current usage of the term is quite broad, and scholars often indicate dif-
ferent things by the term. Narrowing down the definition might be useful for more
accurate discussion. We finally review four core processes of performance manage-
ment and several motivation theories supporting their importance.
Performance Management Movement in the United States

Over the last several decades, governments at all levels in the United States have
instituted a variety of performance management arrangements, such as performance
budgeting, performance contracting, and performance-based human resource manage-
ment (Abramson, Breul, & Kamensky, 2006). The Government Performance and
Results Act of 1993 (GPRA), for example, mandates federal agency involvement in
performance management activities: It requires federal agencies to develop annual
and long-term plans for what they intend to achieve, measure how well they are doing,
generate information for performance budgeting, and communicate performance infor-
mation to Congress and the general public (Radin, 2006). The Program Assessment
Rating Tool (PART), a federal program management tool developed by the George W.
Bush administration, also demands federal agency participation in similar performance
management activities at the program level (Moynihan, 2008). The Bush administra-
tion also sought to make federal personnel practices more flexible and performance-
oriented by two major personnel reforms: the enactment of the Homeland Security Act
of 2002 and the creation of the National Security Personnel System for civilian
employees in the Department of Defense (Brook & King, 2008).

Cho and Lee 239
One can find similar initiatives at the lower levels of government. As Hays (2004)
identifies performance management as one of the most significant trends in state and
local human resource management in recent years, many state and local governments
have implemented diverse performance management initiatives, including strategic
planning and management, managing for results, and performance budgeting (Melkers
& Willoughby, 1998, 2004; Poister & Streib, 1999, 2005).
Definition of Performance Management

Although diverse initiatives of performance management are currently employed,
defining performance management, at least in the public management field, is not as
straightforward as it may seem. Performance management has been used as an all-
encompassing term to describe any management process that involves collecting,
interpreting, and/or utilizing performance information for performance improvement—
whether for budgeting, program management, performance contracting, or personnel
management (Behn, 2002; Poister, 2003; Pollitt, 2001). This murky definition of
performance management is not surprising, given the scope and breadth of perfor-
mance management practices.
Behn (2002, p. 20), however, notes that the various definitions used by practitioners
and scholars basically take two forms: referring either to “efforts to improve the per-
formance of individual employees through personal performance plans, performance
appraisals, and the usual collection of carrots and sticks” or to “the collection of orga-
nizational, managerial, and leadership strategies that are designed to get the people
within a public agency—and their essential collaborators—to achieve specific public
purposes.” Although large-scale performance management systems indicate that these
two notions of performance management can and should be integrated, they are distin-
guished. The former, reflecting the perspective of human resource professionals (Behn,
2002), focuses primarily on the processes of motivating individuals to perform at higher
levels. By enhancing individual performance—and thereby enhancing individual
accountability as well—within an organization, performance management is expected
to contribute to organizational performance. The enactment of the Civil Service Reform
Act (CSRA) of 1978 is a good example of this first type of performance management.
The CSRA, one of the earlier attempts at tightening the links between pay, firing, and
performance, led to the development of more modern performance appraisal and per-
formance pay in federal agencies (Haga, Richman, & Leavitt, 2010). On the other hand,
employing a macro perspective, the latter concerns the achievement of performance
targets and organizational mission by setting and implementing strategies to ensure sup-
port and commitment from internal and external stakeholders (Behn, 2002). The GPRA
of 1993 is an example of this second type of performance management.
This study examines the impact of performance management as a human resource
management tool by employing the former perspective. With this micro approach,
it defines performance management by using human resource terms: Performance

management is a process of managing employee performance by planning, monitor-

ing, evaluating, and rewarding individual contributions.
Core Processes of Performance Management

Performance management as a human resource management process involves a sequence
of four core steps: “identifying and setting clear and measurable performance goals;
measuring performance to monitor progress toward the achievement of goals; providing
feedback on performance results; and utilizing performance appraisals to inform major
personnel management decisions such as rewards and accountability” (Schermerhorn,
Hunt, & Osborn, 2008, p. 155).
As an integrated and continuous process, effective performance management depends
on proper implementation of each of these steps. Concepts and theories of work moti-
vation help to explain how these steps can work to motivate people to perform at
higher levels. Goal-setting theory, first of all, stresses the importance of clear goals to
individual motivation and performance (Locke & Latham, 2002). Clear and specific
goals are more motivational than vague, general goals since they provide directions
and guidance, serve as criteria for objective assessment of individual contributions,
and give a sense of which tasks should take precedence. Employee participation is also
emphasized by goal-setting theory in that the sense of ownership created through this
process helps to build employee acceptance and commitment to goals (Locke & Latham,
2002). In addition, task feedback through performance appraisal helps employees
understand where they stand in relation to achieving their goals and where they can
improve.
Other theories of motivation also support the idea of using performance manage-
ment as a motivational tool. Expectancy theory stresses the importance of establishing
clear links between performance and rewards: the idea being that good performance
will bring rewards—either extrinsic or intrinsic—as outlined in an agreed-upon plan
that will motivate employees to perform at a higher level (Vroom, 1964). Equity theory
highlights the centrality of fairness in the design and implementation of rewards and
punishments; employees’ work efforts are affected by their perceptions of how others
are rewarded (Adams, 1965). The effectiveness of any performance management
scheme thus depends on proper management of employee perceptions of equity.
These theoretical underpinnings imply that performance management is indeed a
management-intensive process and that successful implementation calls for careful
managerial attention to each of the steps in the process. In other words, performance
management cannot be successful unless all four steps are well managed and integrated
as a whole system. Such a full-scale performance management requires managers at
all levels to develop managerial skills and competencies relevant to each step (e.g.,
Bilgin, 2007; Grote, 2000; Latham, Almost, Mann, & Moore, 2005; Risher & Fay,
2007). In addition to these managerial skills and competencies, an intangible managerial
resource is required of everyone in the organization—trust. The next section discusses
this managerial resource.

Cho and Lee 241
Trust: A Facilitator of Performance Management

Definition and Expected Effects
Although trust has been defined in various ways, Rousseau, Sitkin, Burt, and Camerer
(1998) find that most scholars’ definitions share a common element: trust as a psycho-
logical state. Accordingly, Rousseau et al. (1998, p. 395) define trust as “a psychological
state comprising the intention to accept vulnerability based upon positive expectations
of the intentions or behavior of another.”
Interpersonal trust within organizations has been dealt as a critical factor in
maintaining a highly motivated workforce. Scholars from various fields, including
leadership theory (e.g., Dirks, 2000; Fairholm, 1994; Zand, 1997), transaction cost
theory (e.g., Williamson, 1993; Zaheer, McEvily, & Perrone, 1997), and rational choice
theory (e.g., Ostrom, 1998), insist that trust is a valuable managerial resource. In
summary, Kramer (1999) provides three ways in which trust conveys benefits to
organizations: by decreasing transaction costs, by increasing spontaneous sociability,
and by facilitating voluntary deference. Interpersonal trust reduces the necessity of
monitoring and control, which leads to decreased transaction costs (Williamson,
1993). It increases altruistic behavior within organizations. Organizational citizenship
behavior (OCB), defined as “those organizationally beneficial behaviors and gestures
that can neither be enforced on the basis of formal role obligations nor elicited by
contractual guarantees or recompense” (Organ, 1990, p. 46), is representative of
such behaviors. Dirks (2000) indicates that trust in leaders facilitates employee
acceptance of organizational rules and goals. Empirical research based on these
theories finds several outcomes of trust—among them high levels of job satisfaction,
organizational commitment, and individual and organizational performance; and low
levels of turnover (Dirks & Ferrin, 2001).
Of the many kinds of trust within organizations, we focus on trust in supervisors.
The power of trust increases when a high risk or vulnerability exists (Dirks, 2000), and
the relationship between subordinates and supervisors presents that kind of relation-
ship—at least from the subordinates’ perspective. Employees’ trust in their supervisors
is especially critical for performance management in that supervisors play substantial
roles throughout the process, including evaluation of employee performance and pro-
vision of feedback.
Performance Management and Trust in Supervisors

The research assumes that trust has an indirect effect as well as a direct effect on the
given outcomes: perceived work-unit and agency performance. Although most existing
studies focus on the direct effect of trust, one can reasonably assume that trust also has
an indirect effect in that it nurtures a condition under which management strategies
work more effectively (Dirks & Ferrin, 2001). Several studies demonstrate such mod-
erating effect of trust between motivation and group performance (Dirks, 1999), between
performance appraisal feedback and individual performance (O’Reilly & Anderson,

1980), and between bargaining toughness and negotiation outcomes (Schurr &
Ozanne, 1985).
From a theoretical perspective, expectancy theory provides a good explanation for
the role of trust in the process of performance management. Under a high level of trust,
two major elements of expectancy theory, expectancy and instrumentality, are
enhanced. Expectancy, the perceived probability that employees’ efforts will lead to
good performance, will be raised when employees trust that their supervisors fairly
evaluate them and provide constructive feedback. On the other hand, instrumentality,
which is the perceived probability that employees’ good performance will lead to
rewards, will also be increased when employees believe their supervisors will give
them rewards faithfully based on performance appraisal. Condrey’s (1995) study pro-
vides empirical support for this theoretical perspective. According to the study, federal
managers with a high level of trust in the organization showed more positive
evaluation of performance appraisal and pay–performance linkage as well as better
acceptance of human resource management reform. By managing employees’ expec-
tations, trust in supervisors will increase employees’ acceptance of the performance
management system, which in turn will further enhance the effectiveness of perfor-
mance management.
The positive role of trust is also explained by Kramer’s suggested routes, decreas-
ing transaction costs and facilitating voluntary deference. A high level of trust enables
managers to run the performance management system with less monitoring and control
of their subordinates. It also elevates employees’ acceptance of the initiative and lets
them follow the given rules and procedures (Condrey, 1995; Kramer, 1999). Finally,
employees’ trust in their supervisors lays the fundamental groundwork for successful
implementation of performance management by nurturing a supportive organizational
climate (Condrey, 1995; Gabris & Ihrke, 2000; Reinke, 2003).
Method
This section discusses the data, measurements, and analytic method employed. In
addition, we test the seriousness of common method bias, one critical limitation of this
research. Harman’s single-factor test demonstrates that the bias is not very serious,
which allows us to proceed to the analysis.
Data, Measurements, and Analytic Method

This research uses the Merit Principles Survey 2005 (MPS) to test the effects of per-
formance management and trust. The U.S. Merit Systems Protection Board (MSPB)
examines the health of federal merit systems by periodically conducting a government-
wide survey (U.S. Merit Systems Protection Board, 2007). The MSPB conducted its
online survey during the summer and fall of 2005. Stratified random sampling was
employed to represent all agencies and all levels of employees. Of the 74,000 federal
employees who were invited to participate, 36,926 employees completed the survey

Cho and Lee 243
(U.S. Merit Systems Protection Board, 2007). The survey is useful for this research in
that it provides specified questions concerning the four core steps of performance
management. The survey also contains several questions asking about trust in supervi-
sors for various aspects.
Like most surveys, MPS 2005 uses a 5-point Likert-type scale for most questions.
To minimize measurement error, major independent variables, including performance
management and trust in supervisors, are measured by multiple measurements. Mean
values are used to integrate multiple measures into single indicators. Table 1 explains
measurements of variables.
Both dependent variables, perceived work-unit performance and perceived agency
performance, are ordinal in that they are measured by a single indicator. When considering
that performance is a multidimensional concept, using a single indicator is a limitation
of this research. Focusing on service quality, for example, the work-unit performance
measure cannot capture efficiency of work. Likewise, by the current agency performance
measure, one cannot examine managerial quality. This limitation requires caution in
interpreting the analysis results.
We measure performance management by integrating nine questions that cover a
variety of performance management activities in the human resource management pro-
cess; these include employees’ understanding of the appraisal system, their participation
in the system’s design, the transparency of criteria, the proper implementation of the
system, and so on. The measurements reflect all four core steps we discussed above. For
example, the first four questions reflect the first step, identifying and setting clear goals,
whereas the final question deals with the fourth step, utilizing performance appraisal for
rewards. Integrating these measures is supported from a statistical perspective, as the
Cronbach’s alpha value is .88 and only one factor is retained by the principal compo-
nent factor analysis.
Trust in supervisors is measured by six items, which concern various aspects of
supervisors’ personality and behaviors. The MPS 2005 has a few more measures of
trust in supervisors, but we do not include them to clearly distinguish the trust measure
from the performance management measure. For example, the item I trust my supervisor
to fairly assess my performance and contributions is not included because it is related
to the both variables. The principal component factor analysis differentiates trust mea-
sures from those of performance measurement (see appendix for the result). Like
the performance management measures, the six measures of trust in supervisors are
integrated by using a mean value, and the Cronbach’s alpha value of the trust mea-
sures is .95.
The control variables, except self-efficacy, are measured by single indicators such
as the 5-point Likert-type scale and dummy variables.2 Self-efficacy captures individu-
als’ own perceived impact in the workplace, which may affect their perception of their
organizational performance. The measure of individual resources focuses on resources
necessary to each employee’s individual job, whereas the measure of organizational
resources indicates whether the workforce has the job-specific knowledge and skills to
accomplish organizational missions. Three demographic variables—including female,

Table 1. Measures of Variables
Variable name Survey items

Work-unit performance My work unit produces high quality products and services
Agency performance My agency is successful in accomplishing its mission.
Performance management • I know what is expected of me on the job.
• I understand the basis for my most recent performance
rating.
• The standards used to appraise my performance are
appropriate.
• I participate in setting standards and goals used to
evaluate my job performance.
• I understand what I must do to receive a high
performance rating.
• I have sufficient opportunities (such as challenging
assignments or projects) to earn a high performance
rating.
• I know how my performance rating compares to others in
my organization who have similar jobs.
• In my work unit, performance ratings accurately reflect
job performance.
• Recognition and rewards are based on performance in my
work unit.
Trust in supervisors I trust my supervisor to . . .
• Listen fairly to my concerns
• Apply discipline fairly and only when justified
• Clearly communicate conduct expectations
• Act with integrity
• Refrain from favoritism
• Keep me informed
Self-efficacy • I am treated with respect at work
• My opinions count at work
• My job makes good use of my skills and abilities
Individual resources I have the resources to do my job well.
Organizational resources The workforce has the job-relevant knowledge and skills
necessary to accomplish organizational goals.
Agency experience How many years have you been with your current Federal
Agency?
Supervisory status What is your supervisory status?
(a) Nonsupervisor, (b) Team leader, (c) Supervisor, (d) Manager,
(e) Executive
Note: Coded as a binary variable. Nonsupervisor and Team
leader were coded as 0.
Female Are you (a) Male (b) Female
Note: Coded as a binary variable. Females were coded as 1.
(continued)

Cho and Lee 245
Table 1. (continued)
Variable name Survey items

Minority What race or ethnic category do you consider yourself to be?
(a) American Indian/Alaskan Native, (b) Asian, (c) Black/African
American, (d) Native Hawaiian/Pacific Islander, (e) White, (f)
Hispanic or Latino
Note: Coded as a binary variable. Whites were coded as 0,
and others were coded as 1.
Education What is your current education level?
(a) High school, GED, or equivalent, (b) Associate’s degree,
(c) Bachelor’s degree, (d) Master’s degree, (e) Doctorate or
equivalent
Note: The variable was treated as an ordinal variable.
race, and supervisory status—are measured as binary variables. Agency experience is

used as an interval variable, whereas education is used as an ordinal variable.
For an analytic method, ordered logit regression is employed because both dependent
variables are ordinal. The moderating effect of trust is tested by using the interaction
term of performance management and trust. The multicollinearity issue is of particular
serious concern when one uses an interaction term in the regression analysis (Friedrich,
1982). To avoid this problem, both performance management and trust measures
were standardized in calculating the interaction term.
Test of Common Method Bias

One explicit limitation of this research is using perceived, rather than objective, measures
of performance. A related limitation, from a statistical perspective, is the reliance on a
single data source, the Merit Principles Survey 2005. Survey respondents with overall
positive attitudes might respond to all survey items in a positive manner because they
have a tendency to maintain consistency in their responses (Podsakoff & Organ, 1986).
Thus, it becomes problematic when both our dependent and independent variables are
derived from the perceptions of survey respondents. This problem is called common
method bias, a limitation of most empirical studies using self-administered surveys.
This bias makes it difficult to discern between respondents’ overall attitudes and the
real functional relationships among the variables (Podsakoff & Organ, 1986), which
lessens the validity of the analysis.
Although scholars should pay attention to the bias, it does not make survey research
useless. The current consensus seems to be that although common source bias does
exist, it somewhat inflates investigated relationships rather than completely invalidating
the results (Crampton & Wagner, 1994). But, it is necessary to test the seriousness of the
bias. To test the degree of the bias, we ran Harman’s single-factor test that implements

principal component factor analysis of all the variables in the model. One concludes
that the bias is serious when the analysis retains only one factor or a single factor explains
most covariance (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). The analysis
revealed that eight factors were retained, and the first factor explained only 18% of the
variance. To be stricter, we performed the analysis without demographic variables; only
two factors were retained and the first factor explained 41% of the entire variance.
Although the explained variance increased, it was still less than 50%. The result shows
that the bias is not so serious as to make our analysis invalid even though it may still
inflate regression coefficients.
Results
Descriptive Statistics
Table 2 explains descriptive statistics, including mean, standard deviation, and zero-order
correlations among the variables. Regarding the two dependent variables, work-unit
performance received a higher rating than agency performance; the mean value of the
former is 4.13, whereas that of the latter is 3.93. Regarding the demographic variables,
when compared with the entire population of federal employees, the current sample
seems representative although experienced employees are slightly overrepresented.3 In
the MPS 2005, 41% of the respondents are females, while 44% are females in
the entire population of federal employees in the year of 2005. Minorities are 26%
in the sample, while the percentage is 32% in the population in 2006.4 Although
employees, whose federal service experience is above 30, are 18.4% in the 2005
MPS sample, 10.4% have such length of experience in the entire population. The
overrepresentation of experienced employees might be related to underrepresentation
of minorities in that minorities are negatively associated with agency experience
(–0.07).
As expected, both performance management and trust in supervisors are positively
correlated with the dependent variables. One can observe that performance management
and trust in supervisors are highly correlated; they have the second highest correlation,
.63, among the variables in the model. Supervisory status is more strongly correlated
with the dependent variables than other demographic factors. Variables such as female,
minority, and education level are barely correlated with both dependent variables and
performance management.
Ordered Logit Analysis of Perceived Work-Unit Performance

Table 3 explains the ordered logit regression analysis for perceived work-unit
performance. Because a large sample size makes all independent variables statistically
significant, we focus on leverages of variables by using odds ratios. The final column
of the table indicates percent change in odds by one standard deviation change.
Performance management has the largest leverage; by one standard deviation, the

Table 2. Descriptive Statistics
Variables Mean SD 1 2 3 4 5 6 7 8 9 10 11 12
1. Work-unit 4.13 0.81

performance
2. Agency performance 3.93 0.87 0.45**
3. Performance 3.61 0.78 0.48** 0.45**
management
4. Trust in supervisors 3.80 1.01 0.39** 0.35** 0.63**
5. Performance 0.63 1.24 −0.17** −0.13** −0.29** −0.36**
Management × Trust
6. Self-efficacy 3.76 0.90 0.48** 0.50** 0.69** 0.63** −0.29**
7. Individual resources 3.53 1.03 0.31** 0.41** 0.42** 0.32** −0.12** 0.44**
8. Organizational 3.89 0.91 0.38** 0.51** 0.39** 0.28** −0.11** 0.41** 0.39**
resources
9. Agency experience 16.18 9.58 0.08** 0.03** 0.06** 0.04** −0.03** 0.08** −0.01 0.03**
10. Supervisory status 0.46 0.49 0.17** 0.10** 0.19** 0.13** −0.05** 0.20** −0.06** 0.06** 0.23**
11. Female 0.41 0.49 −0.02** 0.01 −0.00 −0.04** 0.01 −0.04** 0.02** −0.01* −0.06** −0.14**
12. Minority 0.26 0.44 −0.07** −0.01* −0.01* −0.07** 0.02** −0.07** 0.03** 0.01 −0.07** −0.08** 0.14**

13. Education 2.89 1.23 0.07** −0.01 0.02** 0.05** 0.01 0.05** −0.08** 0.01* −0.04* 0.18** −0.17** −0.11**
Note. N = 30,367.
*p < .05. **p < .01.
247
Table 3. Ordered Logit Regression of Perceived Work-Unit Performance
Coefficient SE % Change in odds by one SD

Performance 0.723*** 0.023 75.1
management
Trust in supervisors 0.156*** 0.016 17.1
Performance 0.125*** 0.011 16.7
Management × Trust
Self-efficacy 0.488*** 0.021 54.7
Individual resources 0.156*** 0.014 17.5
Organizational 0.482*** 0.015 55.2
resources
Agency experience 0.007*** 0.001 7.0
Supervisory status 0.309*** 0.025 16.7
Female 0.061* 0.024 3.0
Minority −0.246*** 0.027 −10.2
Education 0.095*** 0.010 12.3
Cut 1 2.360
Cut 2 4.093
Cut 3 5.893
Cut 4 8.978
N 30,392
LR chi-square 11,496.83
Pseudo R2 0.1692
*p < .05. **p < .01. ***p < .001.
odds of having a more positive evaluation of work-unit performance increases by

75%, holding all other variables constant. Trust in supervisors is also significantly
associated with work-unit performance, but its effect is much smaller than that of
performance management; by one standard deviation increase, the odds of having
higher work-unit performance is enhanced by 17%.
However, trust in supervisors also affects work-unit performance through its
indirect effect. One can observe that the interaction term between performance
management and trust is positive and significant. Figures 1 and 2 show how levels of
trust influence the effect of performance management. From Figure 1, the predicted
probability of choosing the “strongly agree” category for work-unit performance is
dramatically enhanced as the evaluation of performance management increases.
Moreover, the effect of performance management is further elevated under a high level
of trust. In contrast, as shown in Figure 2, the predicted probability of “strongly dis-
agree” with excellence of work-unit performance decreases as performance manage-
ment increases, and the probability is further suppressed with a high level of trust. The
difference is largest in the high level of performance management for the “strongly
agree” category (roughly a 20 percentage point difference), whereas the largest

Cho and Lee 249
Strongly Agree with Work-Unit Performance .6
.4
.2
0
1 2 3 4 5
Performance Management
Low Trust High Trust
Figure 1. Predicted probability of “strongly agree” with work-unit performance

Strongly Disagree with Work-Unit Performance
.04
.03
.02
.01
1 2 3 4 5
Figure 2. Predicted probability of “strongly disagree” with work-unit performance

difference is observed in the lowest level of performance management for “strongly

disagree” category (1.5 percentage point difference). Altogether, these figures indicate
that trust in supervisors strengthens the relationship between performance manage-
ment and perceived work-unit performance.
Most control variables show expected directions. As a motivational factor, self-
efficacy is strongly related to the positive evaluation of work-unit performance. Both
individual and organizational resources matter for work-unit performance, but the
leverage of organizational resources is three times larger than that of individual
resources. Among the demographic factors, supervisory status shows the largest influence.
Supervisors, who commonly have a higher stake in organizations than do nonsupervi-
sors, may perceive themselves more integral to their organizations (Whitener, Brodt,
Korsgaard, & Werner, 1998) and evaluate their organizations more positively. Employees
with longer agency experience, employees who are highly educated, and female
employees give a more positive evaluation of work-unit performance than do others. On
the other hand, minorities show more negative evaluations than do Whites. This might
come from their negative experience in work groups caused by cultural differences
and perceived discrimination (Jackson & Alvarez, 1992), but more investigation is
required to confirm the argument.
Ordered Logit Analysis of Perceived Agency Performance

As shown in Table 4, performance management is substantially associated with per-
ceived agency performance. Compared with the previous analysis, however, the
leverage is decreased by half; by a one standard deviation increase of performance
management, the odds of having higher agency performance is enhanced by 35%,
holding all other variables constant.
The percent change in odds ratio shows that trust in supervisors has a minimal direct
effect on perceived agency performance. However, it also has an indirect effect; from
the significant interaction term, it affects agency performance through the process of
performance management. Figure 3 indicates that the predicted probability of “strongly
agree” with agency performance increases as performance management is elevated,
and the probability is further promoted when employees have a high level of trust in
supervisors. On the other hand, the probability of “strongly disagree” with agency per-
formance decreases as the level of performance management is enhanced (Figure 4).
Under a high level of trust, the probability is further depressed. Again, the value of trust
as a managerial resource is demonstrated in that it facilitates the effectiveness of perfor-
mance management.
However, we should not overestimate the effects of performance management and
trust in supervisors on agency performance. Control variables, including self-efficacy,
individual, and organizational resources, have much higher percentages of odds than
performance management. Especially, organizational resources have the largest coef
ficient among the variables as its importance is already demonstrated in several studies
(e.g., Boyne, 2003; Rainey & Steinbauer, 1999). Demographic variables except minority

Cho and Lee 251
Table 4. Ordered Logit Regression of Perceived Agency Performance
% Change in odds
Coefficient SE by one SD
Performance management 0.389*** 0.023 35.2
Trust in supervisors 0.054*** 0.016 5.6
Performance Management × Trust 0.138*** 0.010 18.6
Self-efficacy 0.665*** 0.021 81.2
Individual resources 0.348*** 0.014 43.2
Organizational resources 0.876*** 0.015 122.3
Agency experience −0.004*** 0.001 −4.0
Supervisory status 0.181*** 0.025 9.4
Female 0.086*** 0.024 4.3
Minority −0.051 0.027 −2.2
Education −0.039*** 0.010 −4.6
Cut 1 3.227
Cut 2 5.188
Cut 3 7.073
Cut 4 10.400
N 30,367
LR chi-square 14,888.72
Pseudo R2 0.2046
*p < .05. **p < .01. ***p < .001.
are statistically significant, but their leverages are negligible; the percentage of change
in odds by one standard deviation is less than 10%.
Discussion
The results of our analysis enable us to answer both research questions in the affirma-
tive. At least perceptually, performance management drives organizational performance—
it positively affects both work-unit performance and agency performance. Although
there continue to be challenges, performance management can bring positive results to
federal workplaces if properly designed and implemented. This research also demon-
strates the value of trust. Although its effect is not dominant in the model, trust
in supervisors lays fertile ground for successful performance management; it
strengthens the relationships between performance management and the consid-
ered outcomes.
We have already mentioned several limitations of this research, which project some
future research directions. From the methodological perspective, although Harman’s
single-factor test demonstrates that the common source bias is not serious, one may

.25
Strongly Agree with Agency Performance
.2
.15
.1
.05
1 2 3 4 5
Figure 3. Predicted probability of “strongly agree” with agency performance

Strongly Disagree with Agency Performance
.012
.01
.008
.006
.004
.002
1 2 3 4 5
Figure 4. Predicted probability of “strongly disagree” with agency performance

Cho and Lee 253
want to employ multiple data sources to completely remove the bias. If future research
employing objective performance measures shows an identical result, that result will
increase the validity of our finding. Using multiple measures incorporating diverse
dimensions of performance is also desired. Related to that, using a cross-sectional data
set prevents us from developing causal relationships. Even though we ground our dis-
cussion on theories and previous research, the current analysis reveals associations
among variables rather than causal relationships. To address this limitation, a sophis-
ticated framework such as time-series analysis is desired. This research employs a
micro approach by defining performance management as a human resource manage-
ment tool. However, investigating the issue in a comprehensive way is also required.
Measuring the concept comprehensively by considering managerial practices as well
as organizational strategies may reveal multidimensions of performance management
and how those dimensions are connected each other. In addition, replication in differ-
ent settings is necessary. We will be more confident in the effect of performance man-
agement and the value of trust when we observe similar results at the state and local
level.
In spite of the above limitations, the current research still provides some implica-
tions. From a theoretical perspective, the result implies that Theory X and Theory Y
should go together for the maximum effectiveness of management tools. Four core
steps of performance management include both Theory X components and Theory Y
components. The reinforcement mechanism of rewarding high performers and punish-
ing low performers has Theory X components, whereas facilitating employee participa-
tion and providing feedback reflect Theory Y components. The system will be effective
when both components are integrated, and the effectiveness will be further enhanced
under a high level of trust, the proliferation of Theory Y. When federal agencies incor-
porate both components in their management systems and facilitate trusting relation-
ships among the workforce, one can expect better organizational outcomes.
That theoretical implication naturally leads to some practical implications about
building trust. Having trustworthy supervisors who exercise fairness in managerial
activities and take care of their subordinates is critical to the successful implementation
of performance management. Accordingly, top management should be attentive to cul-
tivating a fair and benevolent culture within organizations. Developing training pro-
grams to make trustworthy supervisors deserves attention. Another practical implication
comes from designing the performance management system. As discussed, the four
core steps must be presented to be successful; management should clarify goals and
objectives, fairly measure performance and provide feedback, and utilize performance
information as major determinants of rewards and recognition (Schermerhorn et al.,
2008). In addition, federal agencies may want to consider employee participation in
the system design.
Nevertheless, we also need caution in interpreting and applying the current find-
ings. Historically, the performance management movement has not been very success-
ful. Although various reform initiatives were adopted since the CSRA of 1978, their
success was limited. For example, the Performance Management and Recognition
System that was introduced in 1984 sought to replace the previous Merit Pay System,

but it was discontinued (Condrey, 1995). Recently, the National Security Personnel
System was created for civilian employees in the Department of Defense to provide
more flexibility in human resource management. However, the system was also repealed
with much controversy and resistance from employees (Haga et al., 2010). Some schol-
arly findings also echoed those negative results. Managers did not believe that merit
pay awards would be based on their performance (Pearce & Perry, 1983), and merit pay
failed to increase employee performance (Gaertner & Gaertner, 1984). When consider-
ing the limitation of the current research using the perceived measure of performance,
we need more solid evidence for achievement of performance management. Finally,
although this research suggests some conditions for successful performance manage-
ment, more research is desired.
This research begins to fill the research gap in areas of performance management
and trust in the public management field. More empirical research is required to vali-
date current arguments of scholars and practitioners. In addition, there is much knowl-
edge to be obtained to build a better performance management system and develop and
Appendix
Factor Analysis of Performance Management and Trust in
Supervisors
Variables Survey questions Factor loadings
Performance management I know what is expected of me on 0.3445 0.5104
the job.
I understand the basis for my most 0.3580 0.6169
recent performance rating.
The standards used to appraise my 0.4265 0.5762
performance are appropriate.
I participate in setting standards 0.3042 0.7523
and goals used to evaluate my job
performance.
I understand what I must do to 0.2736 0.7624
receive a high performance rating.
I have sufficient opportunities 0.2401 0.6862
(such as challenging assignments
or projects) to earn a high
performance rating.
I know how my performance 0.2909 0.7657
rating compares to others in my
organization who have similar jobs.
In my work unit, performance ratings 0.3528 0.6930
accurately reflect job performance.
Recognition and rewards are based 0.0920 0.5308
on performance in my work unit.
(continued)

Cho and Lee 255
Appendix (continued)
Variables Survey questions Factor loadings
Trust in supervisors I trust my supervisor to . . .

Listen fairly to my concerns 0.8781 0.2388
Apply discipline fairly and only when 0.8721 0.2212
justified
Clearly communicate conduct 0.8496 0.2502
expectations
Act with integrity 0.8932 0.1947
Refrain from favoritism 0.8786 0.2126
Keep me informed 0.8446 0.2450
Note. Principal component factor analysis is used with Varimax rotation.
maintain trust within organizations. We hope this research will facilitate efforts pur-
suing new knowledge in these important areas.
Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship,
and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of
this article.
Notes
1. Merit Principles Survey 2005 defines the terms, work-unit, and agency, as follows; “Your
work unit is the group of people you work with on a regular basis and with whom you most
identify”; “Your agency is the governmental component where you work . . . if you work in
one of the large cabinet-level departments . . . then “your agency” will be a major component
of that department” (U.S. Merit Systems Protection Board, 2007, pp. 69-70).
2. The measures of self-efficacy have the Cronbach’s alpha value of .83.
3. For the comparison, the research used the Central Personnel Data File (CPDF) available on
the FedScope site (www.fedscope.opm.gov) operated by the Office of Personnel Management
(OPM).
4. Because the data on minorities was not available in 2005, we used the CPDF data of
June 2006.

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Bios
Yoon Jik Cho is an assistant professor of Public Administration Department at Yonsei
University in Korea. His research focuses on role of trust in public management, human
resources management, and leadership.
Jung Wook Lee is an assistant professor of public administration at Yonsei University, Seoul,
Korea. Prior to joining Yonsei in 2009, he taught at the University of Illinois-Springfield,
U.S.A. His research focuses on government performance and the political context of public
management.

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Performance Management 32(3) 236­–259

Yoon Jik Cho1 and Jung Wook Lee1

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who evaluate employee performance, conditions the effective implementation of per-

Research Question 1: Are employees’ evaluations of performance management

Performance Management: Current

Performance Management Movement in the United States

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Definition of Performance Management

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management is a process of managing employee performance by planning, monitor-

Core Processes of Performance Management

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Trust: A Facilitator of Performance Management