Impact of the performance management process on

employee motivation and performance in the Chinese

banking industry

Abstract This study examines the relations among the use of performance management

process, intrinsic and extrinsic motivation, and performance in the Chinese banking

industry. I draw on self-determination theory and theories developed in an Anglo-American

context to explore the relation between four components of using a performance

management process and motivation. The data from 113 respondents in the Chinese state-

owned banking sector is applied to verify a structural equation model. According to the

results, employees’ intrinsic motivation is positively affected by the practice of prerequisites

and performance planning, while their extrinsic motivation is positively affected by the

implementation of performance review. In addition, there is a positive correlation between

performance and both intrinsic and extrinsic motivation. The findings also highlight that the

Chinese cultural factors have a negative effect on the performance management practice

in the Chinese banking industry.

Changqi Wang

Student number: S4212770

Supervisor: Paula M.G. van Veen-Dirks

Word count: 7684

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1. Introduction

Human capital factors are virtually aligned by every business with achievement

of strategic goals. In other to increase their competitiveness, businesses also

seek to maximize employee skills and contributions. Performance management

is usually viewed as a key to the attainment of such goals. It is a continuous

process of achieving the strategic goals based on the measurement,

identification and development of teams’ and members’ performance (Aguinis,

2009). Daniels and Bailey (2014) argued that the performance management

process is the foundation for the effective and efficient attainment of goals. In

the performance management framework by Aguinis (2009), prerequisites,

performance planning, performance implementation, performance review,

performance evaluation, as well as performance re-contacting and renewal are

all included in the ongoing process of performance management.

Some of the studies have illustrated how performance management systems

benefit both individuals and employers and, through them, society as a whole

(Sahoo, 2012) and lead to higher performance with increasing interactivity

between the employees and the management (Ukko, 2007). Clearly,

employees are significantly motivated by performance management to perform

better. However, there are few reports about how employees respond to this

system and how the performance management system influences employee

performance. In addition, after the publication of the earlier work by Hofstede

and Boan (1988), more attention has been paid to the link between

management and national culture. Meanwhile, due to the transferability of

western management philosophies, other cultures have also been attracted to

this field (Poon, 2004). However, the activities and functions human resource

management are the focus of most past studies about performance

management; performance management and its relationship with culture are

often neglected in most studies. In particular, China’s banking industry is rarely

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involved in research of performance appraisal (Zhang & Lovegrove 2009).

Therefore, this study is to examine how intrinsic motivation and extrinsic

motivation are affected by the practice of performance management process

and how they in turn affect employee performance in the Chinese banking

industry.

Currently in China, as part of human resource management, performance

management viewed as a modern concept from the western world. However,

China has been identified in literature as a collectivist society with cultural

characteristics like high power distance (Huo et.a., 1995), Confucianism (Child,

1994) and other characteristics. Therefore, there are some differences between

China and other nations in terms of performance management system, and it

might be problematic for China to directly copy western theories of performance

appraisal (Zhang & Lovegrove, 2009). As indicated by Gu and Nolan (2017),

the implementation of western performance management practices is subject

to the influence of Chinese cultural values, suggesting that there will be

differentiation and divergence in their utilization, effect and results. In particular,

there has been much interest in whether or not the Confucian authority chains

(Child, 1994) and the informal social networking—guanxi may increase the

difficulty for the implementation of some elements of western human resource

management (Nolan, 2011).

The Chinese culture gives a source for the profound and special roots of the

authority issue (Hong, 2004). The Confucian authority chains refer to the

respect for social norms, authoritativeness, and the elderly, which requires

people to engage in social interaction in a courtesy and proper manner (Child,

1994). Furthermore, the practice of the Confucian authority concept

emphasizes propriety of speech, propriety of conduct and other means of rules,

to fulfill social obligations in communication (Hong, 2004). In the management

context, the practice of Confucian creates problems for performance

management within organizations. For example, in their study of building

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supervisor-subordinate guanxi, Zhang et al (2016) noticed that employees are

less likely to talk openly with their superiors about performance due to the

respect for authoritativeness and the elderly. In addition, Cooke (2013) argued

that the pursuit of group harmony might increase the importance of team effort,

loyalty, punctuality and other ‘softer’ performance criteria, regardless of

performance.

Chinese personal relationships have given rise of the use of the term guanxi

(Gu & Nolan, 2017). In modern practice, guanxi may influence the trust between

supervisors and subordinates. Farh et al. (1998) noticed that guanxi affects

organizational life in many communicative aspects, including preferential

actions, favorable peer evaluations caused by special relationships, frequency

of communication and interpersonal trust. In addition, due to potential conflicts

of interest in organizational settings, many problems would be brought in the

application of guanxi in performance management (Chen, Chen, and Xin, 2004).

To illustrate, a supervisor might prefer to highly appraise an employee, who has

well-developed guanxi but actually underperforms in the workplace. This

process, may, in turn, negatively affect employees who have no well-developed

guanxi but outperform in their daily work, since it is almost impossible for them

to be fairly evaluated.

Furthermore, performance management practices in China are also under the

distinct influence of other characteristics of Chinese culture, such as modesty

and self-discipline (Cooke, 2013) as well as face saving (mianzi) (Wang and

Seifert, 2016). Cooke (2013) found that the appraisal system is affected by the

norm of self-discipline and modesty, as self-evaluation and criticism are major

components of the appraisal process. Similarity, the need to save face in the

performance management progress exactly mitigates against critiques by

supervisors and assessments by peers (Wang et al. 2017).

In the performance assessment and performance review process, these

Chinese specific factors, like Confucian authority chains, guanxi and

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egalitarianism and modesty might influence the link between performance

management and motivations. Thus, in this thesis, I want to investigate that

how the performance management influences employee motivation and

whether the relationship between the performance management and

motivations is consistent with self-determination theory in a Chinses cultural

background.

The purposes of this paper are to investigate the impact of use of performance

management on intrinsic and extrinsic motivation as well as work performance.

My first contribution is to advance previous research by exploring the relations

among the practice of performance management and detailed motivation types

and work performance in the Chinese banking industry. Second, this research

finds that Chinese specific factors (e.g., guanxi and Confucian authority) have

a negative effect on the performance management practice. And that, in turn,

affects employee’s motivation and work performance.

Research question:

how does the use of performance management influence intrinsic and extrinsic

employee motivations? And how, in turn, do these two types of motivation

influence employee performance.

Sub-questions:

What is motivation?

What is the performance management process?

How does the use of performance management (i.e., prerequisites,

performance planning, performance assessment and performance review)

influence intrinsic and extrinsic employee motivations?

How do intrinsic and extrinsic employee motivations influence employee

performance?

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In the next section, I present the theoretical background of the study, describe

the Chinese state-owned banking industry, and develop the hypotheses. The

research method is introduced in the third section, followed by the presentation

of the findings in the fourth section. The findings are discussed in the fifth

section according to the existing literature. I also analyze limitations of the study

and present my conclusions in the fifth section.

2. Literature review

2.1. Performance management in the Chinese state banking industry

China’s state-owned banking industry is the setting for this study. The adoption

of performance management in the Chinese banking industry has been

investigated in some studies (Gu et.al., 2020; Gu & Nolan, 2017; Zhang &

Lovegrove, 2009). In the recent two decades, China's financial market has

been opened up, and commercial banks face cruel competition and urgently

need to improve their management and market competitiveness (Zhang, 2009).

According to Xie (2001), highly committed and motivated employees contribute

greatly to the Chinese state-owned banking industry. In market orientated

economic systems, as suggested by Akhtar, Ding, and Ge (2008), there is a

progressively close relation between the quality of human resources and

corporate performance. Thus, a key factor for the Chinese banking industry

turns to be effective human resource management.

China’s state-owned banking industry began with a human resource

management reform in the mid-2000s. The changes implemented included

linking pay and promotion in performance appraisals as a more instrumental

approach to achieve efficiency-based targets, profit-making purposes and other

objective goals (Wang et al., 2017). Compared with the period prior to reform,

performance management in state-owned banks currently seems to have some

effects in improving corporate and employee performance at an aggregate level,

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and is basically more market orientated (Rowley, Benson, & Warner, 2004).

However, some researches identify problems in the performance management

process in the Chinese state-owned banking sector. For example, Gu (2020)

notices that bank employees lack recognition and understanding of

performance management and thus they are not enthusiastic about

participating in and cooperating with performance management. Since

objective standards, mutual influence, transparency, and openness are

generally absent in performance management in China, employees tend to

resist the implementation of performance management and hold a skeptical

attitude (Benson et al., 2000). Hempel (2001) notices that Chinese cultural

factors including guanxi (personal relationships), group orientation, harmony,

respect for hierarchy and the elderly, mianzi (face saving) and Confucianism

may be the major causes of such failure in performance management.

Moreover, Ngo, Lau and Foley (2008) stated that conflicting stresses from trade

unions, the central government and the local government, and other persistent

institutional factors may also affect the implementation of performance

management in the context of China. Finally, the limited techniques and

experience of managers in state-owned banks make it more difficult to initiate

changes, especially when pre-reform values and norms are still valued by many

supervisors and employees (Ngo et al., 2008).

These studies prove Chinese factors may influence the practice of performance

management in state-owned banks. However, we do not know how

performance management in China is affected by these factors. Therefore, this

study is primarily focused on China’s state-owned banking industry, the

perception of employees in the industry and the relation between performance

management and employee motivation and performance.

2.2. What is motivation?

The process of seeking satisfaction of an individual’s particular need gives rises

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to motivation (Solomon, et al., 2010). Those individuals who take action to

accomplish their goals which have been clearly defined are called well-

motivated people (Erez & Zion, 1984). Extrinsic motivation and intrinsic

motivation are the two types of motivation commonly defined in literature. The

former is manifesting behaviors not for the acquisition of inherent pleasure, but

for the achievement of a particular end, like perceiving the sense of belonging

in a social environment or obtaining praise from others (King, 2009). The latter

is about particular behaviors to acquire personal satisfaction and internal

enjoyment (Gkorezis & Panagiotis, 2008). To illustrate, it is the motivation to

engage in the performance of a behavior for the purpose of acquiring the sense

of accomplishment and joy that could the behavior itself could provide (Deci,

Connell, & Ryan, 1989). People, driven either by intrinsic or extrinsic motivation,

would take particular actions and develop specific behaviors with the attempt

to achieve a clearly defined objective, which is actually a kind of motivational

response in a broad sense (Salem, 2015).

2.3. Self-determination Theory

Controlled motivation and autonomous motivation (e.g., intrinsic motivation) are

significant different from each other and the distinction between them is central

to SDT. SDT proposes that the satisfaction of three basic human needs --

competence, autonomy and relatedness-- is of particular importance for

facilitating intrinsic motivation (Ryan & Deci,2000b). Within the SDT, individuals

are considered to have autonomous motivation when they conduct an action

because they perceive it meaningful to them or interesting (intrinsic motivation).

In contrast, individuals are considered to have controlled motivation if they feel

pressured when they are demanded, required, threatened or pushed by an

external force (external regulation) to engage in a behavior (Guo, 2007). In the

field of performance management, SDT is applied to theoretically explore

effects of motivation. For example, with the attempt to contribute to SDT,

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Kuvaas (2009) tests how individuals’ work performance is affected by their

intrinsic motivation. In addition, Guo (2007) employed SDT to investigate the

influence of characteristics of performance management on autonomous and

controlled motivations among employees in a survey study in university. I use

SDT and the theories developed in an Anglo-American context in the following

section to examine how motivation is influenced by the performance

management system in the Chinese banking industry.

2.4. The performance management process

According to the definition given by Aguinis (2009), Performance management

is a continuous process of achieving the strategic goals based on the

measurement, identification and development of teams’ and members’

performance. Hence, making continuous improvement in organizational

performance is the core task of performance management systems, and the

improvement in individual employee performance generally determines the

fulfillment of this task (Macky & Johnson, 2000). If this task is subdivided, the

detailed objectives often include, according to the suggestion given by Lawler

(2003), determining who should be eliminated, identifying who to be promoted,

constructing a performance culture, contributing to the implementation of

business strategies, engaging employees in the development of their skills, and

motivating performance. There is an ongoing process for performance

management, as indicated by Aguinis (2009). Prerequisites, performance

planning, performance implementation, performance review, performance

evaluation, as well as performance re-contacting and renewal are the six

interrelated components involved in this process. The performance

management process and its contents are shown in Figure 1 according Aguinis

(2009).

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Figure 1. Performance Management Process (Aguinis, 2009)

The prerequisites include a good understanding of the mission and strategic

objectives of the company and the relevant job. Performance planning includes

a development plan and the consideration of actions and outcomes. When it

comes to performance execution, employees should proactively seek feedback

from their supervisors and devote themselves to attaining organizational goals.

Performance assessment is conducted by both supervisors and other

Prerequisites

Performance

Planning

Performance

Execution

Performance

Assessment

Performance

Review

Performance

Renewal &

Recontracting

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employees. The performance review emphasizes the past, present and future

and works through the appraisal meeting. The final component involves

performance renewal and recontacting in which adjustments are made based

on the data obtained in the review stage.

Kathryn (2013) developed the Performance Management Behavior

Questionnaire (PMBQ), which does not include measurement of performance

excitation as well as performance renewal and reconstructing. Following

Kathryn’s work, I focus on the prerequisites, performance planning,

performance assessment and performance review components in the

framework put forward by Aguinis (2009).

Prerequisites phase

A good understanding of the relevant job and a good understanding of the

mission and strategic objectives of the company are the two important

prerequisites (Aguinis, 2009). Strategic planning is the sources for the

understanding of the mission and strategic objectives of the company.

Particularly, it allows a company to clearly know its goals, the reason for its

existence, its future positioning and the strategies for the attainment of its goals.

For example, the strategic of banks can be improving the customer experience,

strengthening operational efficiency and ensuring a sustainable impact and

financial return to the investors. Similar goals which are constructed based on

the establishment of the organizational goals cascade downward till a series of

objectives can serve the organizational goals are established in each employee.

Aguinis (2009) suggests that this knowledge urges employee to make

contributions in the processing of attaining their own objectives, thus bringing

benefits both to the organization and employees themselves at the same time.

Job description is the source for another prerequisite, namely, a good

understanding of the relevant job. A job description, in its rudimentary pattern,

generally includes the required qualifications, behaviors, responsibilities, tasks,

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contributions, rewards and results for a particular job or position that is available

in a company (Leon Rohr, 2016). As a detailed job analysis, job description is

supposed to correctly describe what a job-applicant would actually do after

being admitted in the illustration of required job activities. According to Scott

(2011), performance management relies on job description to some extent. In

the process of performance management, both employees and supervisors

have access to transparency with the help of job description. As suggested by

Leon Rohr (2016), they can thereby understand the exact expectations on

performance.

Performance planning phase

The consideration of results and behaviors in a performance planning

discussion enable people to under the performance management system

thoroughly (Aguinis, 2009). The outcomes that should be produced by

employees or what should be done are contained in the scope of results.

Performance standards are the major content of the discussing on results.

According to Locke and Latham (1990), performance standards are identified

as a rule for measurement and evaluation, which means that the extent to which

an objective has been achieved by an employee is evaluated according to

performance standard. Bobko (1994) suggests that explicit performance

standards are usually connected to employee performance expectations that

may be communicated by organizations. Consider the job of bank employees,

for example, instead of being phrased in terms of corporate goals and desired

outcomes, standards describe specific desired behaviors.

Performance assessment phase

In the assessment phase, the manager and the employee should work together

to evaluate whether the expected results have been obtained, the degree to

which the expected actions have been shown, and the degree of the attainment

of the organizational goals (Aguinis, 2009). In fact, the employee himself, the

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manager and the peers generally have different perception of one’s

performance (Latham, 2004). For example, due to the limited chance for a

superior to observe each employee, it is impossible for the superior to have a

totally objective and comprehensive evaluation of an employee’s performance.

On the other hand, employees’ self-appraisals are based on their biased

perception of their abilities (Latham, 2004). Therefore, the multisource

appraisals provide the next phase of performance review with comprehensive

and accuracy information.

Performance review phase

To receive feedback on performance, the manager and the employee need to

engage in the appraisal meeting (Aguinis, 2009). This process is also known as

performance review. In general, a review of the past is conducted in the

appraisal meeting to identify the results and the behaviors. Through

investigating over 150 institutions in Scotland, Solatani (2003) revealed that of

the past is emphasized by over more than 80% of institutions. Moreover, the

compensation that an employee can receive if he performs well in the

workplace is also disclosed in a good appraisal meeting. For conducting an

effective performance review, six recommendations were offered by Grossman

and Parkinson (2002), for example, citing certain positive behaviors to identify

good performance, using cases of negative behaviors to present poor

performance, and explaining how to overcome current performance problems

through the use of skills applied in past achievements.

2.5. Performance management and motivation hypotheses

Within Aguinis’s (2009) framework, prerequisites are making sure that

employees know the mission and job descriptions clearly. For bank workers,

the job description covers the specific content of what to be done (i.e. assisting

clients in controlling financial activities and bank accounts), the needed

knowledge (e.g., financial literacy), skills (e.g., strong analytical skills and

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listening skills), and abilities (e.g., ability to multitask). Millette’s (2008) research

shows that workers’ engagement, satisfaction and intrinsic motivation can be

enhanced via job design. Through the guidelines to increase the job’s

Motivating Potential Score (Hackman and Oldham, 1975), it is important to

generate a well-defined job description or a clearly described mission that

enables employees to understand the contribution of their performance to the

accomplishment of the organizational mission (Millette, 2008). Similarly,

Edward (1970) found that the intrinsic motivation attitude items are significantly

related to job description. Furthermore, the prerequisite phase also enables

employee’s goals confirm with those of the organization. It ties the individual

objectives to the organization mission and vision. This is in consistence with

SDT: relating to the organization satisfies an employee’s need for relatedness.

SDT argues that employees’ intrinsic motivation is enhanced through satisfying

their need for ‘relatedness’ (Ryan and Deci, 2000).

In SDT, it is assumed that needs are universal among individuals, although they

tend to have different goals and traits (Sheldon, Cheng, & Hilpert, 2011). Hence,

more attention is paid to need fulfillment and corresponding perceptions.

Therefore, no reason is given in SDT research to predict a relation between

prerequisites and extrinsic motivation. Similarity, Dysvik and Kuvaas (2013)

conducted a survey research to explore the relationship between extrinsic

motivation and achievement goals. They found no support of the moderating

effect of objectives on employee performance and extrinsic motivation. Thus,

the relation between prerequisites and extrinsic motivation is not hypothesized

herein.

To conclude, prerequisites and intrinsic motivation are expected to have a

positive association, because prerequisites could foster feelings of engagement,

satisfaction as well relatedness among those employees. Therefore, I

hypothesize that:

H1: prerequisites in the performance management process are positively

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associated with employee intrinsic motivation.

In the performance management process, performance planning is usually

conducted in order to ensure that employees act according to required

behaviors and achieve performance standards Aguinis (2009). Consider the job

of bank employees. Performance standards could be achieving high grades in

customer satisfaction surveys and opening 25 new certificate of deposit

accounts in a month, while standards of behavior could be welcoming new

clients with energy and “What can I do for you?” spirit and muting cell phones

in the workplace. From the SDT perspective, these standards reduce

employee’s freedom to perform their task. They undermine employees’ intrinsic

motivation due to the restriction on their autonomy. On the other hand, these

standards, as an external regulation, impose a type of extrinsic motivation on

employees (Gagné and Deci, 2005). Employees become extrinsically

motivated and act in order to avoid an undesired consequence or to obtain an

expected result (Gagné and Deci, 2005), which means the employees’ needs

are fulfilled predominantly in indirect ways and not by the activity itself (van der

Kolk et al, 2018).

In summary of the situation for performance planning, I expect that performance

planning has a negative influence on employee intrinsic motivation by reducing

employee autonomy and has a positive influence on employee extrinsic

motivation. The hypotheses below are therefore generated:

H2a: performance planning in the performance management process is

negatively associated with employee intrinsic motivation.

H2b: performance planning in the performance management process is

positively associated with employee extrinsic motivation.

It is important that the performance assessment process is controlled by both

the superior and the subordinate. For bank employees, they need to fill out their

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appraisal forms Monthly or quarterly. Judge (2003) suggested that employees

tend to regard themselves in core self-evaluations as having an internal locus

of control, higher emotional stability, higher self-efficacy, and higher self-

esteem. Employees having high self-esteem are more likely to believe that they

are valuable, important and competent (Pierce & Gardner, 2004), and their

perception of abilities to fulfill a mission usually affects their choice between

avoiding the task and seeking solutions to finish it (Bandura, 1997). In addition,

individuals who perceive higher self-efficacy are likely to choose more

challenging tasks (Bandura, 1997). Thus, positively self-evaluated employees

seek for tasks which can give full play to their values or meet their intrinsic

interest and goals that are autonomously chosen (Joo et al., 2010). SDT argues

that critical component of intrinsic motivation is autonomy, such as the freedom

to make an independent choice (Van der Kolk et al, 2018). Therefore, the self-

evaluation is positively linked to intrinsic motivation.

Furthermore, managers and peers also fill out their appraisal forms regularly.

In terms of employee performance, self-views may be different from views given

by important others (e.g., the manager and peers) (Aguinis, 2009). This is the

reason why some employees have the motivation to receive praise from others,

especially when they receive undesired feedback from peers or the manager

(Brutus, 1999). This is consistent with King’s (2009) theory that extrinsic

motivation is manifesting behaviors not for the acquisition of inherent pleasure,

but for the achievement of a particular end, like perceiving the sense of

belonging in a social environment or obtaining praise from others.

To conclude, in terms of employees working in the banking industry, their

intrinsic and extrinsic motivations are expected to have a positive relation with

performance assessment, since performance assessment has been proved to

be able to foster feelings of autonomy among employees and trigger their

motivation to receiving higher rating from others. Hence, the two hypotheses

below are put forward on this basis:

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H3a: performance assessment in the performance management process is

positively associated with employee intrinsic motivation.

H3b: performance assessment in the performance management process is

positively associated with employee extrinsic motivation.

Performance review involves the appraisal meeting to evaluate the

performance of employees, give feedback and decide the reward on their

performance. SDT holds that an individual’s innate psychological needs cannot

be met by the attainment of extrinsic objectives (e.g. money incentive and

positive feedback) (Guo, 2007). Furthermore, due to the performance review,

employees are guided to pay more attention to performance measurement and

to the targets that are set, which restricts employees’ autonomy and

subsequently reduces their intrinsic motivation. From other perspectives, the

internal causes of one’s behaviors (intrinsic interest) are discounted when

rewards are targeted at performance, while more emphasis is actually put on

rewards (external incentives). The loss of intrinsic motivation is then the natural

consequence of the ascribing transfer from internal to external reasons (Pierce,

2003). In line with this, the intrinsic motivation of bank employees is expected

to have a negative relation with performance review. Given that performance

review requires employees to pay attention to the pre-set targets and the way

their performance is measured, employee behavior is driven by the

instrumentality of the linkage between behaviors and their corresponding

outcomes.

In summary of the situation for performance review, I expect that performance

review has a negative influence on employee intrinsic motivation by reducing

employee autonomy and exerts a positive influence on employee extrinsic

motivation by fulfilling employee’s extrinsic needs. Thus, the following

hypotheses are proposed herein:

H4a: performance review in the performance management process is

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negatively associated with intrinsic motivation.

H4b: performance review in the performance management process is positively

associated with extrinsic motivation.

2.6. Performance-related hypotheses

Many studies have illustrated that intrinsic motivation plays a role of enhancing

performance. For example, Grant’s (2008) survey study shows that the way

performance and productivity are associated intrinsic motivation is moderated

by intrinsic motivation and also proposes that when employees perceive their

ability to help others or want to help others, they can have the motivation to

benefit others. Cerasoli’s (2014) meta-analysis suggests that performance

affects intrinsic motivation in a positive manner. Besides, it is shown in Kuvaas’s

(2009) cross-sectional investigation that intrinsic motivation mediates the link

between work effort and the perception of investment in employee development.

Therefore, intrinsic motivation is considered as one of the sources of the

enhancement in performance.

Prior studies have also examined extrinsic motivation and reported its positive

association with performance. Extrinsic motivation is found in Yousaf’s (2015)

survey study to be positively related both to contextual performance and task

performance. Sung (2009) states that strong extrinsic motivation has a positive

influence openness to creativity, which is reported to make leading contribution

to employees’ performance in a variety of sectors. Therefore, extrinsic

motivation is considered as one of the contributors of the enhancement in

performance. Thus, the following hypotheses are proposed herein:

H5: Intrinsic motivation is positively associated with employee performance

H6: Extrinsic motivation is positively associated with employee performance

Key elements examined in this study and their relations are shown in Figure 2.

The four major components of performance management are depicted on the

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left and are hypothesized to have a certain relation with employee intrinsic and

extrinsic motivation. In the meantime, employees’ performance is also

hypothesized to be under a positive influence of intrinsic motivation and

extrinsic motivation.

H1+

H2a- H5+

H3a+ H4a-

H6+

H2b+

H3b+

H4b+

Figure 2. Chart of relations studied

3. Methodology

3.1. Survey method

The survey method was adopted in this study to investigate employee

motivation in China’s banking industry and its relation with performance

management. In particular, a questionnaire was designed to collect relevant

data. A large amount of numerical data is collected and analyzed in the survey

study to explore the association between theory and research and to generalize

the results in a much broader social context (Babbie, 2010). The choice of this

survey method was driven by its ability to probe deeper into the complicated

Prerequisites

Performance

planning

Performance

assessment

Performance

review

Performance

Extrinsic

motivation

Intrinsic

motivation

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phenomena regarding performance management and motivation.

The questionnaire consists of two sections. To investigate the characteristics of

respondents, six socio demographic items are included in the first part,

including: age, gender, educational qualification, the bank the respondent is

working in, position in the bank and work period.

In the second part, a 4-item scale, based on the Aguinis’s (2009) performance

management framework and Kathryn’s (2013) Performance Management

Behavior Questionnaire (PMBQ), was used to measure the four components

including: prerequisites (PRE), performance planning (PLA), performance

assessment (ASS) and performance review (REV). Further, a 3-item scale was

used for the identification of intrinsic motivation (INTM) based on the

questionnaire designed by Gagné et al. (2010). Kline (2011) notices that for a

questionnaire, a three-item or four-item construct is empirically more preferable

than a two-item construct. Furthermore, as suggested by Van der Kolk et al.

(2018), it is necessary to examine two important extrinsic factors, namely status

and economic certainty. Thus, the extrinsic motivation (EXTM) contains an item

“Are you doing this job because of the status it provides” from Van der Kolk et

al.’ (2018) questionnaire and two economic items from the questionnaire by

Gagné et al. (2010) for the purpose of achieving empirical and theoretical

enhancement in the strength of the construct. Lastly, the performance (PERF)

consists four items that based on online questionnaires on Questionnaire Star,

a Chinese survey website.

Respondents responded to a 7- point Likert scale to indicate the degree of their

agreement with each item. The score for each item ranges from 1 (strongly

disagree) to 7 (strongly agree). Before the formal investigation, I pre-tested the

full survey on two experienced bank employees for issues such clarity and

understandability. After I received their feedback, I revised the questionnaire

based on their suggestions. To fit the Chinese cultural context, some revisions

were made on the wordings of some items. Moreover, I added certain items in

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order to consider Chinese culture values, such as “Do you think the relationship

with the leader (guanxi) will affect performance evaluation” and “Do you think

the performance appraisal is just filling out forms, meaningless”. The full

questionnaire is presented in Appendix A.

3.2. Sample and access to research sites

I set this study in state-owned banks in China. The sample of this study includes

bank workers mainly from the four state-owned banks in China: The China

Construction Bank (CCB), The Bank of China (BC), The Agricultural Bank of

China (ABC) and The Industrial and Commercial Bank of China (ICBC).

In November 2020, an online survey was delivered after the pre-test to my

acquaintances that were working in the four state-owned banks in Shandong

province and Beijing. There were some difference in their professional status,

but all the acquaintances could play a role in obtaining permission from their

superiors for the implementation of the study among their employees.

Consequently, they successfully invited their colleagues to take part in the study

voluntarily and anonymously, on the premise that the confidentiality was

guaranteed. After three weeks, a total of 132 responses were collected from

the online survey. After removing unfinished surveys that lacked important data,

like their position and education level, 129 useful responses remained.

Motivation, the primary variable in this study, was examined at the level of

‘employees’ to achieve the research purposes. Employees who are not

managerially responsible are the main sources of data collection. Therefore, I

excluded six responses form middled managers and senior managers, and 123

useful responses remained. In addition, for all the relevant items, I examined

the standard deviation in each case to identify suspicious cases (Van der Kolk

et al., 2018). The lowest levels of standard deviation were found in 10 cases,

ranging from 0.188 to 0.491, and thus I excluded these cases from my analysis.

Finally, a total of 113 responses were examined in this study.

21

Table 1 and Table 2 show the descriptive statistics of the demographic data of

the respondents. From Table 1, around 60% of the respondents are woman.

The age ranges from 26 to 35 have the largest number of both male and female

respondents, which was about 45 per cent of respondents. They all worked in

Chinese state-owned banks, and about 40 per cent of respondents were from

China Construction Bank (CCB). A lot of respondents (43%) had worked in

banks for five to ten years. Generally, around 60% of the respondents achieved

bachelor and about 30 per cent of respondents had master degree or above.

Table 1. Demographic descriptive statistics sample

Variable Frequency Percentage

Age respondents (n = 113)

20-25 years 12 11%

26-35 years 50 44%

36-45 years 34 30%

45+ years 17 15%

Gender respondents (n = 113)

Female 71 63%

Male 42 37%

Education respondents (n=113)

High school degree 14 12%

Bachelor degree 65 58%

Master degree or above 34 30%

Experience in the organization (n = 113)

0-5 years 20 18%

5-10 years 43 38%

10-15 years 21 19%

15+ years 29 26%

Bank respondents (n=113)

ABC 32 28%

BC 24 21%

CCB 42 37%

ICBC 15 14%

22

Table 2. Descriptive statistics for main variables

Variables (n=113) Mean Median SD

Prerequisites 6.12 6 0.97

Performance planning 5.66 6 1.26

Performance assessment 4.77 5 1.40

Performance review 5.67 6 1.44

Intrinsic motivation 5.82 6 1.27

Extrinsic motivation 5.52 6 1.24

Performance 5.70 6 1.31

4. Findings

A measurement model in SPSS software was operated on Questionnaire Star

for the purpose of testing the unidimensionality of multiple-item constructs.

Appendix B shows the standardized factor loadings yielded thereby. I find the

chi-square = 395.414, p-value <0.0001. That means that it is a poor model fit,

due to the significant chi-square values. So, I standardize the data. After

adjusting the data, I found GFI is 1.0>0.9, RMR <0.0001, CFI is 1.0 >0.9. AIC

is better from Saturated model. I think it is fitted under the Saturated model. The

degree of freedom is 0 in the saturated model.

To investigate the links between performance management, intrinsic and

extrinsic motivation and performance, structural equation modeling (SEM) was

applied in the analysis. The choice of this method was driven by the possibility

for the construction of a model to explain all the relations investigated and the

incorporation of multiple dependent variables into simultaneous estimation

(Hair et al., 2006). I use SPSS software on Questionnaire Star to assist the

implementation of this study.

Three steps were followed in the analysis. First, I estimate a model based on

Figure 1 that code the base model. Secondly, I trim the model for insignificant

paths that are not hypothesized and the prerequisites’ influence on extrinsic

23

motivation. Then I get the trimmed base model. Lastly, the hypotheses were

examined with the trimmed model.

Table 3. Base model, trimmed base model and hypotheses

Model 1 (Base model) Model 2 (Trim. base model)

Relation Coeffic. P Coeffic. P Hypothesis Support?

PRE→INTM 0.321** 0.000 0.396** 0.000 H1 Accepted

PLA→INTM 0.209 0.238 0.196 0.222 H2a Rejected

PLA→EXTM 0.967 0.042 0.867 0.037 H2b Accepted

ASS→INTM 0.083 0.223 0.082 0.238 H3a Rejected

ASS→EXTM 0.11 0.231 0.11 0.231 H3b Rejected

REV→INTM 0.486** 0.000 0.437** 0.000 H4a Rejected

REV→EXTM 0.2* 0.035 0.195* 0.035 H4b Accepted

INTM→PERF 0.624** 0.000 0.437** 0.000 H5 Accepted

EXTM→PERF 0.32 0.099 0.279 0.075 H6 Accepted

* Significant at 1%

** Significant at 0.1%

The hypothesized relations in the model shown in Table 3 could be verified

through examining their p-values and coefficients. The significant positive

coefficients of PRE→INTM (p < 0.01) mean that Hypotheses 1 is supported. In

other words, prerequisites are positively associated with intrinsic motivation.

Meanwhile, hypothesis 2a should not be supported, because the coefficient of

PLA→INTM is not significant. Hypotheses 3a and 3b are also rejected. The

results reveal no significant association between intrinsic motivation and

extrinsic motivation and performance assessment. In addition, not as

hypothesized, performance review has a positive influence on intrinsic

motivation, since the coefficients are significantly positive (p<0.01), and thus

hypothesis 4a is not supported. Nevertheless, given a positive relation between

extrinsic motivation and performance review, it is evidenced to support

hypothesis 4b (p < 0.05).

The significant coefficients also support EXTM → PERF (p < 0.05) and INTM

24

→ PERF (p < 0.01), verifying the positive relation between performance and

intrinsic and extrinsic motivation.

Table 4. Respondent's perception of performance assessment

Perception Frequency Percentage

Self-assessment (n=113)

Meaningful 39 35%

Meaningless 53 47%

Not sure 21 19%

Supervisor's assessment (n=113)

Not affected by Guanxi 48 42%

Affected by Guanxi 47 42%

Not sure 18 16%

The Table 4 shows the respondents’ perception of performance assessment.

Although around 75 per cent of employees report that they complete self-

assessment regularly, only 35 per cent of respondents think the self-

assessment is meaningful and most respondents think it is just filling out forms,

meaningless. Moreover, about 40 per cent of respondents believe the

relationship with the supervisor (guanxi) affects their performance evaluation.

5. Discussion and conclusion

Though the relation between performance management process and employee

performance has been widely recognized in literature for a long time (i.e.,

Sahoo, 2012; Ukko, 2007), it is still unclear how employees respond to this

system and how the performance management process influences employee

performance. Theoretical and empirical examination was conducted in this

study to unravel these relations and explore how the adoption of performance

management (i.e., prerequisites, performance planning, performance

assessment and performance review) influences intrinsic and extrinsic

employee motivations, and how employee performance is further influenced by

25

intrinsic and extrinsic motivation.

Following the SDT perspective, the study tested the link between performance

management and the link among different motivations and work effort.

Generally speaking, the results are a bit mixed, however, the effects are either

positive or insignificant according to Table 3. For the prerequisites component

of the performance management progress, I found that it has a positive and

significant relation to intrinsic motivation, which supports the hypothesis 1. This

is because well-defined job description and clearly-stated mission enable

employee’s goals confirm with those of the organization (Millette, 2008). It ties

the individual objectives to the organization mission and vision. It is in

consistence with SDT: relating to the organization satisfies an employee’s need

for relatedness. SDT argues that employees’ intrinsic motivation is enhanced

through satisfying their need for ‘relatedness’ (Ryan and Deci, 2000).

In addition, my findings do not support hypothesis 2a which states that

performance planning affects intrinsic motivation negatively. The findings

illustrate that intrinsic motivation and extrinsic motivation is influenced positively

by performance planning. Karasek’s (1979) demand-control model might

explain the difference between my hypothesis and the empirical results.

Karasek (1979) argues that the high demands in highly stressfully jobs

(characterized by high job demands and low job control) tend to bring undesired

influence to workers’ health and generate stimuli which could not be converted

to actions because of the incompetence of employees to control their jobs. On

the other hand, active jobs (characterized by high job control and high job

demands) are likely to contribute to personal improvement, learning and

motivation in the workplace (Portoghese et al., 2020). Karasek (1979) suggests

that active jobs promote both learning and activation. In other words, they

improve one’s behaviors in general problem-solving activities and overall

activities. From the perspective of SDT, learning and personal growth may

improve employees’ ability to master their jobs, inspire the ‘feeling of

26

competence’, and then enhance their intrinsic motivation. What’s more, in

China, the work pressure in economic related industries has increased greatly,

of which the banking industry is the most stressed (Guo, 2019). Moreover,

Zhou’s (2020) survey study finds that Chinese bank employees face the current

situation of high work pressure, high workload and intensity of work, and low

job satisfaction. In other words, jobs in Chinese banking industry can be

considered as high demanding jobs. Therefore, the demand-control model

(Karasek, 1996) might explain why the performance planning can increase the

intrinsic motivation in Chinese banking industry.

The results do not support the hypothesis about performance assessment and

intrinsic and extrinsic motivation (performance assessment positively affect

intrinsic and extrinsic motivation). This may be caused by the particular

background setting for this study, namely the Chinese state-owned banking

industry. Well-developed national cultural characteristics tend to the

investigation focus of researches on the way and results for Chinese

organizations to apply performance management (Vaiman and Brewster 2015;

Kang and Shen 2016). In state-owned enterprises, performance management

practices are usually negatively affected by employees’ seniority, their guanxi

(interpersonal connections) and other Chinese cultural factors (Gu and Nolan

2017). Under the impact of such factors, employees who perceive the biased

and political nature of the performance management process will be extremely

dissatisfied with the practice of performance management (Dello et al., 2017).

Gu et. al.’s (2020) case study suggests that appraisal-rating decisions made by

supervisors in state-owned banks are influenced most by employees’

interpersonal connections. In other words, those who do not have well-

developed interpersonal connections perceive this as unfair and demotivating.

Therefore, state-owned bank employees’ procedural and distributive justice

perception of performance assessment (e.g., self-evaluation, supervisor’s

evaluation and peer’s evaluation) is significantly low. These theories are

27

consistent with my survey results shown in the Table 4, which reports

respondent's perception of performance assessment. Although around 75 per

cent of employees think they complete self-assessment regularly, only 35 per

cent of respondents think the self-assessment is meaningful and most

respondents think it is just filling out forms, meaningless. Moreover, about 40

per cent of respondents believe the relationship with the supervisor (guanxi)

affect their performance evaluation. Thus, the Chinese culture values may

explain why performance assessment do not play an important in the China

state-owned banking industry.

Lastly, while the results support hypothesis 4b about the positive association

between performance review and extrinsic motivation, they reject hypothesis

4a. The results indicate that the performance review positively affects employee

intrinsic motivation. Cognitive evaluation theory (CET) offers an alternative

theoretical account of the positive effects of rewards on intrinsic motivation

(Deci et al, 1999). From CET, rewards can only undermine intrinsic motivation

when people are initially interested in the task. Deci et al. (1999) discuss the

controlling versus informational aspects of rewards. When rewards closely

linked to achievement, rather than performance standards, rewards can provide

information about competence that that is positively evaluated (Deci et at.,

1999). This evaluation may offset some the controlling aspects of rewards and

enhance intrinsic motivation. Therefore, when people succeed at attaining a

performance standard, they are rewarded and perceive the rewards as being

related to accomplishment, tending to have a higher level of intrinsic motivation

(Pierce et al., 2003). What is more, according to SDT, rewards are said to shift

the attribution of causation for an activity from internal to external sources

(Gagné and Deci, 2005). However, Pierce’s (2003) study shows that this shift

may not happen if employees perceive information about individual

accomplishments from extrinsic rewards, due to their focus not on the external

context but on selves. Therefore, the cognitive evaluation theory (CET) and

28

Pierce’s (2003) study might explain the result about the positive influence of

performance review on intrinsic motivation.

More in general, performance was observed to be positively associated with

intrinsic and extrinsic motivation, revealing the significance for the Chinese

banking industry to have a motivated workforce.

Some limitations of my study can be addressed by conducting further research.

The limitations mainly lie in the sector focus in the banking industry and the

specific geographical scope (primarily in Northern China). A longitudinal study

can be carried out in the future to examine the influence of performance

management on motivation and performance over time. Besides, the study only

focuses on the Chinese state banking industry and neglect city commercial

banks and foreign-owned banks. According to Gu (2020), compared to other

types of organizations, state-owned enterprises are more likely to receive a

greater negative impact of interpersonal connections, seniority and other

national cultural factors on performance management practices. Hence,

different organizational contexts can be targeted in future studies to broaden

and deepen the knowledge about the use of performance management. As

indicated by Sheldon and Sanders (2016), daily experience of employees who

are involved in performance management practices is overlooked in most

researches, since the focus is generally put on the effect of such procedures

on corporate performance. Therefore, Chinese organizations are advised to be

studied with the “inside out” approach (Gu, 2020).

In this study, the relation between motivation and performance management

was examined based on relevant theories and the analysis of data collected.

The hypotheses proposed in accordance with SDT and other theories

developed in an Anglo-American context are partially supported by the results.

I also found that Chinese cultural factors play a significant role in the

performance management practice. Admittedly, this claim requires further

investigation, but my findings indicate that these national cultural characters

29

affect the association between the practice of performance management and

two types of motivation.

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Appendix A – Constructs & Survey Items

Prerequisites

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

(a) The bank has a clear development strategy and business goals

(b) Employees’ personal performance goals are clear

(c) Job and task descriptions are being used to provide employees with clarity about their

tasks

(d) Employees are very clear and timely know leader’s expectations and requirements

Performance planning

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

(a) Employees clearly understand the bank’s performance management standards

(b) Performance management standards are fair and just for employees

(c) The performance management system can be strictly implemented

(d) Activities of employees are registered and/or monitored

Performance assessment

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

(a) Employees regularly self-evaluate their work

(b) For employees, performance appraisal is just filling out forms, meaningless (RC)

34

(c) The relationship with the leader (Guanxi) do not affect performance evaluation of

employees

(d) Performance evaluation can truly reflect the work performance of employees

Performance review

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

(a) Employees are being given specific feedback about what is good and bad about

performance

(b) Employees are being given special recognition for exceptional performance

(c) Employees are being rewarded for good results

(d) Employees are being promoted for good results

Intrinsic Motivation

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

I do this job . . .

(a) because I enjoy this work very much

(b) for the moments of pleasure that this job brings me

(c) because I am proud of this job

Extrinsic Motivation

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

I do this job . . .

(a) because this job affords me a certain standard of living

(b) because it allows me to make a lot of money

(c) for the status it provides me

Performance

Please rate the extent to which you agree or disagree with the following statements (1 =

strongly disagree, 7 = strongly agree):

(a) The overall work efficiency of the bank is very high

(b) The bank’s employees are very cohesive

(c) The bank's products and services are highly competitive in the market

35

(d) The customer satisfaction of the bank is very high

Appendix B –Measurement model