Learning, Performance and Reward

Title: Learning, Performance and Reward; Theory and Practice Revisited

Authors; Caroline Rowland, Chester Business School

Roger Hall, Hall Consultancy, UK

Contact address ; Chester Business School

University of Chester

Parkgate Road

Chester CH1 4BJ

e-mail:

Word count: 5924

Overview

Over the last twenty years there has been considerable growth in literature on organizational learning, performance management and reward. The contribution of learning to organizational effectiveness is well recognised. Yet, this is rarely reflected by measures of performance. This paper re-examines research carried out by the authors into learning, performance and reward. Data from over 700 respondents, most of whom were managers, is considered. Managers value their own learning, which is frequently appreciated by their organizations. Yet, learning is not measured formally by their organizations. Monetary rewards are used to recognise achievement of what are universally perceived as unreliable and irrelevant measures and there is no consideration of wider concepts of reward. Little progress has been made in aligning competitive advantage through learning with appropriate performance measures and reward systems.

Introduction

Since the early 1990s a growing literature on organizational learning has emphasised the central role of learning in developing and maintaining competitive advantage. Over the same period measures of organizational performance have emerged, which include processes alongside the more familiar outcome-based measures. Performance-related reward systems have continued, particularly in the financial services sector. More recently there have been important contributions to the psychology of happiness or well-being, which illuminate theories of human motivation and organizational reward systems.
Yet, there is little sign of significant linkages between these developments. Few measures of organizational health or excellence give learning the prominence that theory suggests it should have. Research has continued to demonstrate the often negative relationship between payment by results and long-term sustainable organisational success ( Geary,1992). Expressions such as “reward for failure” have entered into the popular lexicon since the 2008 banking crisis and few lessons seem to have been learned about reward systems in particular. It seems that organizations may be not only rewarding the wrong behaviours but using the wrong rewards to do so.
The authors have been designing and managing management development programmes for over twenty years, both university and organization based, mainly at post-experience, postgraduate level. During that time they have questioned participants about their own development and the way in which organizational performance management systems have supported and promoted this. Some additional organization based research was also undertaken. Our findings indicated that appraisal systems rarely encouraged learning and that performance related-pay was always counterproductive.
In this paper we re-examine the data to explore whether there is any support for the proposition that, if performance related rewards are to contribute to organisational success, they must measure organizational learning and employ rewards, which reflect recent theoretical developments in human motivation theory.

Literature

Learning organizations

Learning organizations as a distinct area of study may be thought of as dating from the early 1990s when two seminal books were published, one on either side of the Atlantic. In the USA Peter Senge’s The Fifth Discipline (1990) focused on Systems Thinking, Personal Mastery, Mental Models, Shared Vision and Team Learning as essential elements in building a learning organization. In the UK Pedler, Burgoyne and Boydell published the first edition of The Learning Company (Pedler et al., 1991). Their contribution proposed a three stage evolution, which comprised Surviving, Adapting and Sustaining.
The intellectual foundations of organizational learning stretch back well beyond the 1990s through the work of Argyris and Schon (1978); Cyert and March (1963); Simon (1955); Kolb and Fry (1975); Lewin (1951); Emery and Trist, 1960 and the Tavistock Institute; (Miller, 1976; and Rice, 1965). These, in turn, owed much to earlier developments in the natural sciences. Over the last twenty years the literature has burgeoned, but, in this paper, we re-examine the key elements on which the notion of organizational learning depends. To us these are; Systems Thinking; Double/Triple Loop Learning and; Transformation.
Systems Thinking is Peter Senge’s Fifth Discipline. It is the conceptual framework, which integrates his other four disciplines and is, in Senge’s words: “a body of knowledge and tools developed over the last fifty years, to make the full patterns clear and to help us to see how to change them effectively.” (Senge, 1990: 7)
Open systems theory emerged as an interdisciplinary school of thought during the 1920s and 1930s through writers such as Von Bertalanffy (1950). Bertalanffy saw some problems in applying concepts from natural sciences such as ecology and biology to social sciences such as sociology and anthropology, but, by the 1950s, the theories were finding applications in many areas and are central to the idea of the learning organization. By the early 1960s many of the key concepts of open systems theory had found their way into key texts on organizational psychology.
Edgar H Schein, for example (1965: 95), employs open systems concepts of constant interaction, multiple goal seeking, interdependence, the input-transformation-output model, subsystems and system boundaries in his redefinition of organizations in terms of processes. Other concepts such as entropy/synergy and homeostasis or dynamic equilibrium are implicit. All are important in what Senge describes as Systems Thinking. Understanding dependencies, causality and the impact which actions in one sub-system may have on another sub-system or on the organization as a whole are crucial if organizations are successfully to adapt to a turbulent environment and avoid pitfalls such as sub-optimisation, where one part of an organization maximises its efficiency to the detriment of the whole.
The second key feature of organizational learning for us is the idea of levels of learning. Chris Argyris (1977) is frequently quoted as defining organizational learning as “a process of detecting error”. However, he also goes on to say: “Error is for our purposes any feature of knowledge or knowing that inhibits learning. When the process enables the organization to carry on its present policies or achieve its objectives, the process may be called single loop learning.” (Argyris, 1997: 116).
In the following paragraphs Argyris introduces double loop learning and theories in action, which he had developed with Donald Schon (Argyris and Schon, 1974).
Single loop learning is about error detection and correction; double loop learning is about examining underlying values and assumptions, about challenging fundamental norms and aims and surfacing differences between theories in use and espoused theories. It is holistic, adaptive and future-oriented. It has also been described as systemic learning (Broersma, 1995). Triple loop learning, the origins of which are fully discussed by Tosey et al. (2012), is described as deutero leaning by Bateson (1973) and as transformational learning by Broersma (1995). It is about learning how to learn, about reflecting on previous learning or failure to learn, identifying facilitators and inhibitors of learning and devising new learning strategies. It may involve developing tolerance for failure, acknowledging outcome/expectation mismatches, challenging theories in use through collaborative review and encouraging inquiry and reflection on learning.

Single, double and triple-loop learning

(Thorsten.org)

At this point it is worthwhile to consider what learning is in the context of an organization. We will use a psychological definition whereby learning is “any relatively permanent change of behaviour that occurs as a result of experience” (Collins, 2012). In an individual, learning takes place in the cognitive, affective and behavioural domains. It could be argued that, in an organization, knowledge, understanding and feelings cannot exist other than in individuals and that it would constitute a category error (Ryle, 1949) to assume otherwise. It would be more difficult to argue convincingly that organizations cannot behave or act, as some behaviours, such as insect swarming, birds flocking or crowds rioting are not merely the sum of individual actions. The organization can be considered as an appropriate unit of analysis for behaviour and, therefore, for behavioural change, organizational learning and performance improvement.
There are, of course, differences between individual and organizational learning. As Senge (1990: 139) points out: “Organizations learn only through individuals who learn. Individual learning does not guarantee organizational learning. But without it no organizational learning occurs.”
Individual learning is, in other words, a necessary but insufficient condition for organizational learning. Individual learning may or may not depend on changes in the cognitive and affective domains; for organizational behaviour to change there may need to be antecedent changes in individual knowledge, understanding, beliefs and attitudes.
In individuals behavioural learning may be informal, spontaneous and reactive. Individuals will certainly improve their learning through a planned and deliberate approach to lifelong learning and continuous professional development, but learning will take place in any event. Planned or deliberate learning is not necessarily instrumental. It can encompass learning for learning’s sake and does not exclude serendipity. Organizations are less likely to react spontaneously to environmental changes. Their learning is usually deliberate, responsive and formal. It is through this planned approach that organizations can build a core competence (the ability to learn quickly), which can help achieve a sustainable competitive advantage (De Geus, 1988; Hatch and Dyer, 2004; Dai et al., 2009).
The concept of transformation is central to systems thinking, to the pioneering work of Argyris and Schon and to the early literature on learning organizations. In the second edition of their book Pedler et al. define a learning company as: “An organization that facilitates the learning of all its members and consciously transforms itself and its context.” (Pedler et al., 1997: 3)
It is nonetheless worthwhile to re-emphasise transformation as the concept is widely used in leadership theory to describe the characteristics of successful leaders (Burns, 1978; Bass, 1985). If successful organizational learning requires transformational or triple loop learning and we know something about the characteristics of transformational leaders, then the tools developed to measure such leadership may be useful in evaluating contributions to organizational learning as well as the selection of individuals who are able to encourage organizational learning (Transformationalleadership, 2007). If we accept that organizational learning is a significant source of competitive advantage, then those elements of organizational learning we have identified need to be capable of being measured and ought to be part of any framework, which purports to measure organizational health, performance or excellence. We turn now to an overview of such schemes and an evaluation of the extent to which they do measure organizational learning.

Performance

Performance measurement and performance management methods and outcomes have stimulated much discussion in the past two decades. Initiatives such as strategic quality management and Human Resource alignment have sought to improve performance through developing people. These initiatives are exemplified by the models of Baldrige, (2011); Deming, (1986); Kaplan and Norton, (1992); Investors in People, (2009) and the EFQM Excellence Framework (1999).
However, when examined, these models have much to say regarding learning and development needs and the importance of the learning organization but there is a dearth of information regarding measurement or acknowledgement of learning in terms of the individual, the organization and tacit knowledge. As Holloway (1995: 93) points out, benchmarking has a “potential universal relevance”. We argue that learning can be measured and benchmarked.
Encouraging workers to learn has enormous leverage in enabling them to manage more effectively and contribute to the bottom line. However, little emphasis is evident from either theory or practice in this area. The Investors in People Framework (2009) rates the areas of : Learning and Development strategy (02); Recognition and Reward (06); Learning and Development (08) and; Performance Management (09).In these areas there is mention of ‘explaining what learning activities should achieve for them’, ‘that people can describe how their learning and development needs are met’ and in terms of performance management ‘how learning and development has improved their performance.’
In the Deming, Baldrige and European Quality models there is reference to operational and statistical measures of improvement but no explicit reference to transferable learning nor deciding to do the right thing. This is also true when applied to Kaplan and Norton’s Balanced Scorecard (1992). The focus is on the reflective practitioner that mostly emphasises single loop learning, that is to say, ‘Are we doing things right?’ They occasionally move into double loop learning when challenging current practice by asking, “Are we doing the right thing?”

A review of quantitative studies carried out by Van De Voorde et al. (2012) examined the relationship between employee well-being and HRM-organizational performance. The authors distinguish operational performance outcomes and financial outcomes. The former include measures such as productivity and quality and the latter include measures such as returns on invested capital and shareholder return. They argue that financial measures are more distal and subject to more additional intervening factors than operational performance indicators, which are proximal and likely to be more influential. We have included any measures of performance but our expectations were that our samples of mainly senior and middle managers would focus more on operational measures.

Reward

As in the case of performance much has been written concerning reward and measuring contribution. The discussions have centred mainly around payment by results focusing on operational metrics rather than strategic or tacit knowledge (Kessler and Purcell, 1993; Cumming, 1998; Chen and Fu, 2003). Research since the late 1950s has shown that reward linked to personal development programmes or appraisals in the form of payments has proved unhelpful and often counter-productive (Meyer et al.,1965; Geary, 1992; Robinson, 1992; O’Neil,1992; Armstrong and Baron, 1998; Toynbee and Walker, 2008; Rowland and Hall, 2010).The Investors in People Framework, (2009) section entitled: Recognition and Reward (09) does not make mention of any rewards for learning. Intrinsic rewards of learning are touched on by less mainstream literature, mainly in the social sciences concerning wellbeing and happiness. Here learning is seen as an end in itself and considered by many as central to happiness and an important component of wellbeing (Aristotle, 2006; Bentham, 1996; Layard, 2006; Robertson and Cooper, 2011).Van De Voorde et al. (2012) include happiness, health and relationships as dimensions of employee well-being. We argue that wider concepts of reward go beyond these dimensions to include areas of personal growth and autonomy.
Other recently emerging theorists build on established models of motivation such as self –actualization (Maslow; 1943) and extrinsic/intrinsic factors (Herzberg; 1968). Recent research by Seligman (2011) examines the notion of flourishing and introduces the idea of PERMA, which stands for Positive emotion, Engagement, Relationships, Meaning and Achievement. He contends that if people have enough to live reasonably that meaning, achievement and engagement with work and colleagues may be what they seek. Within the work context Fisher (2010) provides an overview of job/task characteristics related to happiness at work and concludes that “happiness at work is likely to be the glue that retains and motivates the high-quality employees of the future”. There is no evidence at present to suggest that these factors are routinely measured or reflected in reward systems.

Purpose

In order to explore the relationship between organizational learning, reward and performance, the authors have re-examined the research in these areas that they have carried out over the last fifteen years. Both authors have been involved in Management education as teachers, managers, tutors and examiners for many years, largely in designing and developing postgraduate, post-experience programmes including MBAs. Their research interests are in; Learning and Management Development and; Motivation and Performance. The research under re-examination reflects these interests.

Methods

A range of methods was employed in the six pieces of research. They included:

  • Content analysis of reflections of 185 managers participating in Management Development programmes over fifteen years.
  • Questionnaires issued to participants and their mentors
  • Ethnographic surveys, interviews and questionnaires with over 500 people in two manufacturing organizations. This was a sample of both managers and employees and was representative in terms of age, gender and length of service.
  • Observation by the authors in their roles as tutors, examiners, reviewers and verifiers.
  • Analysis of documents including: Professional Body standards, Syllabi, schemes of work, assignments, examinations and examiner reports. Documents from ten institutions, which were a representative cross-section of centres accredited by one Professional Body in the North West of England, were examined in detail.

Sampling methods were convenience in the case of Management Development participants, representative diagonal slices in the case of the two manufacturing organizations and purposive in other studies. Multiple data sources and member checks were used to verify the accuracy of the data. Where sampling methods permitted, significance testing was employed.

A summary of the research projects, methods and findings is presented in Table 1.

INSERT TABLE 1 HERE

This paper reviews the earlier research and presents the findings and discussion in terms of three themes – learning, performance and reward – and the relationship between them.

Findings

Learning

Personal development was seen as management rather than individually driven and there was considerable suspicion of appraisal systems. However, there was little evidence to show a genuine integration of individual and organizational goals and a transfer of learning from the individual to the organization. (Project A.)

Even in organizations where there was an explicit commitment to learning, the role of appraisal in this process was rarely fully explored. Appraisal was carried out as a symbolic ritual in many instances with little evidence of organizational learning. (Project B)

There was a clear divide between research, teaching and learning and workplace practices. The nature of the divide was dependent on the area of study. In areas which focussed on the development and application of management techniques there was an alignment between research and workplace practices, not reflected in teaching and learning. In more theoretical areas like motivation there was a congruency between research and teaching which does not permeate through to workplace practices. In routine areas neither teaching nor workplace practices were influenced by research findings.
This has profound implications for the role of the educator on professional management programmes. Improvements in developing the ability of managers to learn and manage their own learning has much greater leverage than any amount of taught knowledge. (Rowland and Hall, 2010) Individuals have differing learning needs which cannot be satisfied through a focus on teaching. (Project C.)