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Theoretical Review On Performance Management

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This chapter examines the relevant literature to this study. It evaluates the idea of performance management and how its role on the production of employees and the performance of the organization.
2.2 Theoretical Review
2.2.1 Institutional Theory
Institutional theory refers to a form of policy that is created with an emphasis on the legal and regulatory framework of government structures (Kraft, 2007). It is a widely adopted theoretical standing that puts emphasis on reasonable myths and legitimacy (Scott, 2008). Institutional theory is made up of two dominant trends; Old institutionalism and new institutionalism. New institutionalism rejects the rational models behind historical economics, instead seeking cultural and cognitive interpretations
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Instead, the optimal course of action is a factor of the internal and external situation. Gareth Morgan in his book “Images of Organization”, describes Organizations as open systems that need careful management to satisfy and balance internal needs and to adapt to environmental circumstances. Gareth further states that, there doesn’t exist one single best way of organizing tasks in an institution. The appropriate technique purely depends on sort of task at hand or the prevalent environment. Gareth emphasizes that Management must be concerned, above all else, with achieving alignments and good fits. Some important contingencies for management include; Technology, suppliers and distributors, consumer and interest groups, customers and competitors, governments and labour unions. Other situational or contingency factors are ‘changes in customer demand for goods and services, change in government policy or law, change in environment or climate change, and so forth (Heinz, 2012). The theory provides for leaders who are able to meet the changing needs of the environment as they
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