Performance management when innovation and learning become critical performance indicators

If the organization’s leading performance indicators shift towards innovation and the creation of knowledge, this will result in more non‐routine work and a higher level of interdependency among workers. We argue that a contingent performance management (PM) system has to focus on learning and group processes, on qualitative as well as quantitative goals and on both the individual as well the interpersonal level. Employees of three R&D departments of a firm producing advanced communication systems evaluated a PM system with four stages: accountability, engagement, appraisal, award. The results support our theoretical model. Furthermore, the results show that the firm’s system is perceived as somewhat imbalanced. While the first two stages are in line with our model, the latter two are not. We give suggestions for modifying the PM system to make it balanced, and we discuss the role of the manager.